A month has gone by since the last earnings report for Helen of Troy (HELE Quick QuoteHELE - Free Report) . Shares have added about 2.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Helen of Troy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Helen of Troy's Q3 Earnings Beat Estimates, Sales Up Y/Y

Helen of Troy's adjusted earnings increased 20.5% year over year to $3.76 per share, which surpassed the Zacks Consensus Estimate of $3.11. Higher operating income in the Health & Home and Beauty businesses was the key driver. The upside was partly offset by elevated income tax expenses and lower operating income in the Housewares segment.

Net sales advanced 34.3% year over year to $637.7 million, which beat the consensus mark of $562.2 million. The year-over-year growth was driven by an increase of 30.3% in organic sales along with contributions worth 3.7% from the Drybar Products acquisition. Notably, organic sales growth was backed by increase in brick and mortar revenues, strong international sales along with solid online revenues. The company’s online sales channel registered net sales growth of nearly 34%. Leadership brands registered a rise of 33.9%, while the company’s core business witnessed growth of 35.2%. These upsides were somewhat negated by sluggish back-to-school season stemming from COVID-19 related school closures, declines in non-core business as well as reduced traffic at specific retail stores.

Consolidated gross margin moved up 0.9 percentage points to 45.1%, courtesy of favorable product mix in the Organic Beauty business and the Health and Home segment, as well as positive impact from Drybar Products' buyout and improved channel mix in the Housewares unit. The upsides were partially offset by increased inbound freight expenses and unfavorable product mix in the Housewares unit.

Adjusted operating income surged 24% to $111.9 million. However adjusted operating margin contracted 1.4 percentage points to 17.6%. The downside was triggered by higher marketing, freight and distribution expenses as well as adverse product mix in the Housewares unit. Moreover, increased royalty expenses, legal and other professional fees and higher bad debt expenses were a drag. These were somewhat offset by higher net sales, favorable product mix within Health & Home and the Organic Beauty business, positive channel mix within the Housewares segment, as well as lower travel expenses due to COVID-19. Adjusted EBITDA grew 24% to $117 million.

Segmental Performance

Net sales in the Housewares segment increased 21.4% to $222.4 million driven by growth of 21.2% in organic business. Organic growth was backed by increased demand for OXO brand products amid COVID-19, which resulted in higher brick and mortar, online and international sales. Adjusted operating income in the unit declined 8.3% to $40.9 million.

Net sales in the Health & Home segment advanced 34.6% to $250.2 million, thanks to organic business growth of 33.8%. Organic sales were backed by burgeoning demand for healthy living and healthcare products across domestic and international markets, both in stores and online amid the pandemic. Adjusted operating income increased 22.5% to $35.3 million.

Sales in the Beauty segment jumped 56.2% to $165.2 million, thanks to contributions from the buyout of Drybar Products along with organic business growth stemming from strength in the appliance category, retail holiday promotions, expansion in distribution as well as higher international sales. Adjusted operating income surged significantly to $35.8 million.

Other Financial Details

Helen of Troy ended the quarter with cash and cash equivalents of $156.7 million and total debt (short and long-term) of $440.4 million. For the nine months ended Nov 30, net cash from operating activities was $249.7 million.

We note that on Dec 22, 2020, the company entered into a renewed license agreement with Revlon, in respect of the latter’s trademark for hair care appliances and tools. To attain this exclusive global license, the company paid a one-time, up-front license fee of $72.5 million. As a result of this move, the company will not be obligated to pay royalties or other fees to Revlon, from December 22, 2020 onwards.

Additionally, we note that the company repurchased shares worth $191.6 million during the quarter, in the open market.

Guidance

For fiscal 2021, the company expects net sales in the bracket of $2.075-$2.1 billion, indicating growth in the range of 21.5-23.0%. For its Housewares segment, the company expects sales growth in the range of 12-12.5%. Sales in the Health & Home unit are expected to rise 27.5. In the Beauty segment, the company anticipated sales growth of 27% to 28%.  Additionally, the company expects adjusted earnings in the range of $11.50-$11.70.

The company’s outlook for the fiscal is based on the assumption that the COVID-19 led demand trends will persist. Also the company expects below average impacts from the cough/cold/flu season during the fourth quarter. Further, the company expects capital asset expenditures between $32 million and $35 million for full fiscal year 2021.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -15.9% due to these changes.

VGM Scores

At this time, Helen of Troy has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Helen of Troy has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.