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Why Should You Add Spectrum Brands (SPB) to Your Portfolio?

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Spectrum Brands Holdings Inc. (SPB - Free Report) appears to be on solid footing, with its shares gaining 3.6% year to date against the industry’s decline of 17.7%. The company has been benefiting from product launches, margin expansion, strong cash flow and improved profitability. Moreover, favorable pricing and productivity gains related to the Global Productivity Improvement Plan (“GPIP”) have been drivers. Also, continued strength in the global pet care category bodes well.

The positives not only aided the stock performance but also contributed to strong results in second-quarter fiscal 2021. The Zacks Rank #1 (Strong Buy) company’s earnings and sales surpassed the Zacks Consensus Estimate in the fiscal second quarter. Moreover, management raised its guidance for fiscal 2021.

In the past seven days, the company’s estimates for fiscal 2021 and fiscal 2022 earnings per share have moved up 3.9% and 6.1%, respectively. For fiscal 2021, its earnings estimates are pegged at $6.32 per share, suggesting a rise of 54.2% from the year-ago reported figure.

 

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Now let us discuss at length what makes the global consumer products company an investor favorite.

Spectrum Brands is progressing well with the GPIP program. 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. The company’s second-quarter fiscal 2021 results reflected gains from the plan. Improved productivity related to GPIP along with the rise in volumes across all segments and positive mix aided the gross margin in the reported quarter.

Moreover, the company raised its savings target for the GPIP to $200 million by the end of fiscal 2022. Also, it foresees achieving full run-rate savings over the next nine to 12 months. Notably, the majority of the savings are expected to be reinvested into growth initiatives and consumer insights, R&D and marketing across each business. The plan will also enable the company to deliver value creation and sustainable growth in the long term.

Also, its Global Pet Care business has been aiding the top line. In sync with GPIP, the pet business is on track with exiting non-core assets and activities to focus on core brands. Also, 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 of its newly acquired Omega Sea, which is now part of its Global Pet Care portfolio of aquatic brands.

Moreover, the company is making efforts to strengthen its leadership in the dog chews category via the acquisition of Armitage Pet Care. The move will help it expand the chews business as Armitage is a well-known grocery brand in the U.K. and offers products such as dog chews, cat chews, treats and toys.

In second-quarter fiscal 2021, sales for the Global Pet Care segment improved 23.9%, driven by growth in aquatic and companion animal categories along with solid online sales. The segment’s organic sales rose 10%. Also, strong e-commerce sales along with a spike in demand for aquatics and reptile kits and equipment contributed to segmental growth.

Cumulatively, the pet segment remains poised for growth in 2021, backed by its pipeline of robust innovation and growth strategy.

Upbeat View

Following the strong fiscal second-quarter results, management lifted the fiscal 2021 view. The company now anticipates sales growth in mid-teens, up from the earlier view of high-single-digit growth. This includes a favorable impact of foreign currency. Further, adjusted EBITDA is likely to rise in mid-teens, up from the prior view of high-single-digit growth.

Conclusion

Backed by the progress on its strategies, we expect the company to retain its business momentum in the near term. Its favorable view further supports our suggestion to add this valuable stock for promising returns.

Other Discretionary Stocks to Watch

Lifetime Brands, Inc. (LCUT - Free Report) has a long-term earnings growth rate of 14%. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Crocs, Inc. (CROX - Free Report) , also a Zacks Rank #1 stock, has an expected long-term earnings growth rate of 15%.

Gildan Activewear, Inc. (GIL - Free Report) has a long-term earnings growth rate of 28.6%. It currently sports a Zacks Rank #1.

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