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Spectrum Brands Gains More Than 26% in 3 Months: Here's Why

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Shares of Spectrum Brands Holdings, Inc. (SBH - Free Report) have gained 20.8% in the past three months against the industry’s decline of 15%. The stock’s bullish run on the bourses can be attributable to better-than-expected results for third-quarter fiscal 2020. This marked the second straight quarter of earnings and sales beat. Results gained from solid demand for its products that led to sturdy sales growth in majority of its segments.

Notably, sales for the Global Pet Care business improved 8.9%, with organic sales growth of 8.3% on high-single-digit and double-digit growth in aquatic and companion animal categories, respectively. Encouragingly, the company is on track with its plans to tap into the aquatics and reptile space. In this context, Spectrum Brands is progressing well with the integration process of its newly acquired Omega Sea, which is now part of its Global Pet Care portfolio of aquatic brands. Apart from these, strong e-commerce sales along with a spike in demand for aquatics and reptile kits and equipment contributed to segment growth. Cumulatively, the pet segment remains poised for growth, backed by its pipeline of robust innovation and growth strategy.

Moreover, the company has been witnessing strength in the Home & Personal Care segment. The fiscal third quarter marked the third straight quarter of growth for the segment in a year. Growth was backed by strength in the U.S. small appliances, solid demand and sturdy online sales.

Further, the company is progressing well with its Global Productivity Improvement Plan (GPIP), which has contributed to third-quarter fiscal 2020 results. The plan aims at improving the company’s operating efficiency and effectiveness, while focusing on consumer insights, and growth-enabling functions, including technology, marketing, and research and development. Also, it foresees generating at least $100 million in run-rate savings annually.



However, softness in the security category and supply-chain disruptions, particularly in Mexico and the Philippines, stemming from the COVID-19 situation have marred the Hardware & Home Improvement segment. The company also noted that supply-chain disruptions affected operating income and adjusted EBITDA to the tune of more than $30 million. Moving on, unfavorable currency movements remain a drag as it hurt fiscal third-quarter net sales by $11 million.

All said, we believe that the Zacks Rank #1 (Strong Buy) stock is likely to sustain the strong show driven by strength in its businesses as well as robust growth plans.

Stocks to Consider

Hanesbrands (HBI - Free Report) , a Zacks Rank #1 stock, has an impressive long-term earnings growth rate of 3.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Prestige Consumer Healthcare Inc. (PBH - Free Report) , a Zacks Rank #2 (Buy) stock, has an impressive long-term earnings growth rate of 4%.

Lifetime Brands, Inc. (LCUT - Free Report) has a long-term earnings growth rate of 13% and a Zacks Rank #2.

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