A month has gone by since the last earnings report for Energizer Holdings (ENR Quick QuoteENR - Free Report) . Shares have lost about 11.6% in that time frame, underperforming the S&P 500.

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

Energizer Q2 Earnings & Sales Beat Estimates, Rise Y/Y

Energizer posted sturdy second-quarter fiscal 2021 results, with the top and the bottom line increasing year on year and surpassing the Zacks Consensus Estimate. Results benefitted from growth across the company’s segments, resulting from favorable consumer demand. The company delivered robust performance at all categories and geographies.

Adjusted earnings came in at 77 cents per share, which surpassed the Zacks Consensus Estimate of 54 cents and grew more than doubled  from the year-ago quarter’s figure of 37 cents. The bottom line gained from growth in organic sales, synergy realization, favorable currency and reduced interest expense. The upsides were slightly offset by increased selling, general and administrative (SG&A) expenses and advertising and promotion (A&P) costs, both on a dollar basis.

The company reported net sales of $685.1 million, which beat the Zacks Consensus Estimate of $615.9 million. Also, sales rose 16.7% on a year-over-year basis, buoyed by strong demand for batteries and auto across both the geographical segments. Moreover, organic sales increased 12.7% to $74.7 million in the quarter under review.

Segments in Details

Batteries segment revenues increased 19.9% year over year to $512.8 million, while revenues in the Auto Care segment rose 6.7% to $138.9 million. Revenues in the Lights, Licensing and Other segment rose 14.8% to $33.4 million.

In the Americas, the company recorded revenues of $482 million, up 17.6% from the year-ago quarter’s figure. Revenues in the International segment amounted to $203.1 million, up 14.7% from the year-ago quarter’s levels.

Margins

Energizer’s adjusted gross margin contracted 110 basis points (bps) to 40.5% owing to increased operating costs. Higher operating expenses stemmed from elevated tariffs related to source product to serve robust demand, labor, transportation and product input expense, all consistent with the inflationary trends across the global market. Further, management stated that it incurred synergies worth $14.2 million and witnessed impacts of favorable currency.

Adjusted SG&A expenses, excluding acquisition and integration costs, as a percentage of sales, amounted to 16.7%. The figure declined 170 bps from the year-ago quarter’s level of 18.4%, driven by synergy realization, greater sales and lower spending resulting partly from travel restrictions. Further, A&P, as a percentage of sales, was flat year over year at 4%. Adjusted EBITDA came in at $147.6 million, up 19.8% year over year owing to higher organic revenues and synergy realization.

Other Financial Details

The company ended the quarter with cash and cash equivalents of $261 million, long-term debt of $3,352.2 million and shareholders' equity of $344.4 million.

Adjusted free cash flow from continuing operations was $34.9 million at the end of the reported quarter. During the quarter, the company paid out dividends worth $20.6 million on common stock and $4.1 million of mandatory preferred convertible stock.

Outlook

Based on sturdy first-half performance, management updated its fiscal 2021 view. Robust demand for its brands and products coupled with better cost control helped management raise outlook for adjusted earnings per share and adjusted EBITDA.

The company began lapping the pandemic-elevated demand levels for batteries late in the reported quarter. In connection with the auto care, the company witnessed higher demand at the beginning of May. For the fiscal third and fourth quarters, management expects year-over-year fall in both the categories as it approaches greater normalized levels.

For fiscal 2021, management now expects revenues to grow between 5% and 7%, driven by distribution gains, higher battery demand and favorable currency impacts. Earlier, the metric was projected to come at the higher end of 2-4%. Adjusted gross margin is expected to remain essentially flat year over year. We note that synergies and the favorable currency impacts are likely to mitigate the inflationary cost pressures and mix shifts.

Further, it expects adjusted EBITDA in the bracket of $620 to $640 million for the fiscal year. It had previously guided adjusted EBITDA to come in at the higher end of $600-$630 million. Adjusted earnings per share are now envisioned to be 3.30 to $3.50 versus the earlier projection of $3.10-$3.40.

Management anticipates debt refinancing to contribute to a $30-million decline in the interest expense in fiscal 2021, of which $8 million realized in the fiscal second quarter. Adjusted free cash flow is now estimated to come in at the low end of its earlier guidance of $325-$350 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.04% due to these changes.

VGM Scores

Currently, Energizer has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Energizer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.