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Spectrum Brands Down 58% YTD: Is a Reversal Likely in 2019?
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Spectrum Brands Holdings, Inc. (SPB - Free Report) stock has been witnessing a downtrend lately, owing to dismal fourth-quarter fiscal 2018 earnings, along with higher input costs, which are weighing on margins. Foreign currency remains another headwind for the company.
So far in 2018, shares of Spectrum Brands have lost 57.6%, much wider than the industry’s 27% decline. Further, the company’s dismal run is also evident from its Momentum Score of D.
Let’s Delve Deeper
Spectrum Brands missed top and bottom-line estimates in fourth-quarter fiscal 2018. Moreover, earnings declined year over year due to lower margins and increased distribution costs. Though sales remained flat year over year, it was negatively impacted by foreign currency headwinds. Sales decline in the Global Pet Supplies and Home & Garden segments also impacted the top line.
Gross margin contracted 250 basis points (bps) due to the start-up operating inefficiencies at the HHI Kansas and GAC Dayton facilities as well as higher input costs and adverse mix. Further, the company incurred operating loss of $78.8 million against operating income of $45.8 million in the year-ago period.
Additionally, lower volumes, adverse manufacturing variances associated with volumes and unfavorable mix impacted EBITDA. Rise in freight costs was another deterrent. Adjusted EBITDA margin contracted 520 bps in the fiscal fourth quarter, owing to higher operating and distribution costs.
Based on existing rates, impacts from foreign currency translations on sales are anticipated to be modestly negative in fiscal 2019.
Consequently, the Zacks Consensus Estimate of $3.65 for fiscal 2019 moved down 11.2% in the last 30 days.
Can the Stock Rebound?
Despite the dismal fourth-quarter fiscal 2018 results, Spectrum Brands issued an optimistic view for fiscal 2019. Net sales from continuing operations are projected to grow in fiscal 2019, backed by pricing, innovations, higher marketing investments and solid market share. Further, the company envisions adjusted EBITDA from continuing operations to be $560-$580 million for the fiscal year versus $561.9 million recorded in fiscal 2018.
Moreover, Spectrum Brands is undertaking various initiatives in forms of mergers, acquisitions and divestitures to drive growth across its business. Recently, the company agreed to sell its Global Auto Care business to Energizer Holdings for $1.25 billion in cash and equity. Concurrently, management also signed an amended agreement for the previously announced sale of Global Batteries & Lighting businesses to Energizer for $2 billion in cash. This amendment includes a clause for the potential downward revision of the bid price up to a maximum of $200 million. It expects to close the sale of Global Battery and Lighting business in early January 2019.
Management plans to redirect the capital invested in these businesses toward the development of its core business units, including Hardware & Home Improvement, Home & Garden, Pet, and Appliances. Further, Spectrum Brands will use the divestiture proceeds for debt reduction, reinvestment in buyouts and share buybacks.
Let’s wait and see whether these initiatives are able to bring the stock back on its growth trajectory in 2019.
Presently, Spectrum Brands carries a Zacks Rank #3 (Hold).
Better-Ranked Stocks in the Consumer Discretionary Space
Ralph Lauren Corporation (RL - Free Report) delivered average positive earnings surprise of 7% in the last four quarters. Further, the company has a Zacks Rank #2 (Buy).
lululemon athletica inc. (LULU - Free Report) is also a Zacks Ranked #2 stock. It posted average positive earnings surprise of 19.5% in the trailing four quarters.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
Image: Bigstock
Spectrum Brands Down 58% YTD: Is a Reversal Likely in 2019?
Spectrum Brands Holdings, Inc. (SPB - Free Report) stock has been witnessing a downtrend lately, owing to dismal fourth-quarter fiscal 2018 earnings, along with higher input costs, which are weighing on margins. Foreign currency remains another headwind for the company.
So far in 2018, shares of Spectrum Brands have lost 57.6%, much wider than the industry’s 27% decline. Further, the company’s dismal run is also evident from its Momentum Score of D.
Let’s Delve Deeper
Spectrum Brands missed top and bottom-line estimates in fourth-quarter fiscal 2018. Moreover, earnings declined year over year due to lower margins and increased distribution costs. Though sales remained flat year over year, it was negatively impacted by foreign currency headwinds. Sales decline in the Global Pet Supplies and Home & Garden segments also impacted the top line.
Gross margin contracted 250 basis points (bps) due to the start-up operating inefficiencies at the HHI Kansas and GAC Dayton facilities as well as higher input costs and adverse mix. Further, the company incurred operating loss of $78.8 million against operating income of $45.8 million in the year-ago period.
Additionally, lower volumes, adverse manufacturing variances associated with volumes and unfavorable mix impacted EBITDA. Rise in freight costs was another deterrent. Adjusted EBITDA margin contracted 520 bps in the fiscal fourth quarter, owing to higher operating and distribution costs.
Based on existing rates, impacts from foreign currency translations on sales are anticipated to be modestly negative in fiscal 2019.
Consequently, the Zacks Consensus Estimate of $3.65 for fiscal 2019 moved down 11.2% in the last 30 days.
Can the Stock Rebound?
Despite the dismal fourth-quarter fiscal 2018 results, Spectrum Brands issued an optimistic view for fiscal 2019. Net sales from continuing operations are projected to grow in fiscal 2019, backed by pricing, innovations, higher marketing investments and solid market share. Further, the company envisions adjusted EBITDA from continuing operations to be $560-$580 million for the fiscal year versus $561.9 million recorded in fiscal 2018.
Moreover, Spectrum Brands is undertaking various initiatives in forms of mergers, acquisitions and divestitures to drive growth across its business. Recently, the company agreed to sell its Global Auto Care business to Energizer Holdings for $1.25 billion in cash and equity. Concurrently, management also signed an amended agreement for the previously announced sale of Global Batteries & Lighting businesses to Energizer for $2 billion in cash. This amendment includes a clause for the potential downward revision of the bid price up to a maximum of $200 million. It expects to close the sale of Global Battery and Lighting business in early January 2019.
Management plans to redirect the capital invested in these businesses toward the development of its core business units, including Hardware & Home Improvement, Home & Garden, Pet, and Appliances. Further, Spectrum Brands will use the divestiture proceeds for debt reduction, reinvestment in buyouts and share buybacks.
Let’s wait and see whether these initiatives are able to bring the stock back on its growth trajectory in 2019.
Presently, Spectrum Brands carries a Zacks Rank #3 (Hold).
Better-Ranked Stocks in the Consumer Discretionary Space
Crocs, Inc. (CROX - Free Report) has an impressive long-term earnings growth rate of 15% and it currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ralph Lauren Corporation (RL - Free Report) delivered average positive earnings surprise of 7% in the last four quarters. Further, the company has a Zacks Rank #2 (Buy).
lululemon athletica inc. (LULU - Free Report) is also a Zacks Ranked #2 stock. It posted average positive earnings surprise of 19.5% in the trailing four quarters.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
See them today for free >>