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Bear of the Day: Energizer (ENR)

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Energizer (ENR - Free Report) is a Zacks Rank #5 (Strong Sell) that is one of the world’s leading manufacturers and distributors of batteries and lighting products. The company is also a major designer and marketer of automotive fragrance, appearance and air conditioning recharge products.

The stock has underperformed all year and with falling estimates, investors are worried that 2021 lows might be taken out before the year is over.

About the Company

Energizer is headquartered in Saint Louis, MO and employs 6,000 people. The company distributes products to consumers through several retail locations worldwide, including mass merchandisers as well as warehouse clubs, food, drug and convenience stores, electronics specialty stores and department outlets, hardware and automotive centers, e-commerce and military stores.

Energizer consists of three segments, with Batteries making up 75% of FY21 revenues. Auto Care is 20% and Lights and Licensing is 5%. The company saw 71% of its revenues from the Americas and 29% from international operations.

ENR is valued at $2.5 billion and has a Forward PE of 12. The company holds a Zacks Style Score of “A” in Value and Growth.

Q4 Earnings

Energizer reported earnings in early November, seeing a 10% beat. This was the fourth straight beat, but the stock continues to go lower. Once reason for the recent selling was a weak FY22 guide.

The company sees FY22 at $3.00-3.30 v the $3.51 expected and sees organic revenue unchanged year over year. The see gross margin headwinds due to inflation that might hit margins by 150 basis points.

The margins are already down 70bps y/y and organic revenue is down 5.8% year over year.

Management sees demand normalizing in 2022, but also sees inflationary pressures continuing.

Energizer Holdings, Inc. Price and EPS Surprise

Energizer Holdings, Inc. Price and EPS Surprise

Energizer Holdings, Inc. price-eps-surprise | Energizer Holdings, Inc. Quote

Estimates

Margins are hurting earnings and estimates are being lowered across the board. For the current quarter, estimates have dropped 15% over the last 60 days, falling from $1.11 to $0.94. For the current year, we see an 8% drop over that same time frame.

While value investors might start looking at the name, they might want to hold off until the inflationary issues start to fade.

Technical Take

Energizer is down 25% from 2021 highs and just a couple points off the recent lows. The stock remains just under tis 50-day moving average and until the bulls can get back above the $40 level it looks like dead money.

If the momentum can be turned, then look for the 200-day at $42 as the next resistance.

If the stock breaks lower, the $35 level could offer support. If not, the COVID crash low of $25 would likely be a place of interest.

In Summary

Energizer is a popular brand, but the business is being hit by inflationary pressures. Until the trend changes, there are better places for investors to put their money.


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