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Spectrum Brands (SPB) Q3 Earnings Lag Estimates, Sales Beat
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Spectrum Brands Holdings Inc. (SPB - Free Report) reported third-quarter fiscal 2021, wherein the bottom line missed the Zacks Consensus Estimate, while sales beat the same. Both the top and bottom lines improved year over year. Results gained from higher investments in marketing and advertising along with product launches. However, elevated inflation pressure, driven by transportation and commodity costs, acted as deterrents.
In the past three months, shares of this Zacks Rank #3 (Hold) company have lost 15.3% compared with the industry’s decline of 18%.
Q3 in Detail
Adjusted earnings from continuing operations of $1.57 per share lagged the Zacks Consensus Estimate of $1.59. However, the bottom line advanced 15.4% from $1.36 in the prior-year quarter on the back of favorable volumes and productivity.
Spectrum Brands’ net sales grew 18.1% year over year to $1,162.8 million and beat the Zacks Consensus Estimate of $1,140 million. Excluding the positive impacts of currency and sales from buyouts, organic net sales advanced 12%, courtesy of growth in all four segments, particularly in Hardware and Home Improvement. Sales also grew 13.8% from third-quarter fiscal 2019. Favorable currency of $25.9 million and acquisition-related gains of $34.3 million also contributed to quarterly sales growth.
Gross profit increased 16.8% year over year to $407.4 million, while gross margin contracted 40 basis points (bps) year over year at 35% due to elevated freight and raw-material costs, which were somewhat offset by a rise in volumes, positive mix and better productivity related to the Global Productivity Improvement Program.
SG&A expenses rose 22.5% to $275.4 million. As a percentage of sales, SG&A expenses increased 90 bps to 23.7%. This can be mainly attributable to higher volumes along with a rise in advertising and marketing costs, and elevated incentive and distribution expenses.
The company reported an operating income of $98 million, up 3.6% year over year. The upside was led by higher volumes, better productivity and reduced restructuring costs, which more than offset elevated freight and raw-material costs as well as higher marketing and advertising investments.
Adjusted EBITDA from continuing operations rose 1.8% to $167.4 million in the fiscal third quarter, driven by solid organic growth in Hardware and Home Improvement. Adjusted EBITDA margin contracted 230 bps to 14.4%.
Image Source: Zacks Investment Research
Segmental Performance
Sales in the Hardware & Home Improvement segment rose 48.8% to $419 million, mainly driven by double-digit growth in all categories, particularly security, owing to strong demand and product launches. The segment’s organic sales rallied 46.7% year over year. Also, adjusted EBITDA in the segment skyrocketed 56% to $68 million on the back of higher volumes, and better productivity, which more than offset COVID-related costs, higher freight and raw-material expenses, and the rise in marketing investments.
Sales in the Home & Personal Care segment increased 9.5% to $274.4 million, backed by growth in small appliances, personal care, hair care and garment care products. Strength in Latin America as stores resumed operations also acted as an upside. Excluding the positive impacts of foreign currency, organic net sales for the segment increased 4.2%. The segment’s adjusted EBITDA of $11.8 million plunged 52.8%, driven by higher volumes and better productivity, which somewhat offset pricing impacts, higher freight and raw-material expenses, and the rise in marketing investments.
The Global Pet Care segment’s sales grew 6.5% year over year to $257.3 million, primarily driven by gains from acquisitions, which, in turn, drove growth in the animal category. Excluding the favorable impacts of foreign currency and sales from acquisitions, organic sales fell 7.2%. The segment’s adjusted EBITDA declined 2.8% to $49.2 million due to distribution center transition, which led to sluggish volumes and higher operating costs.
The Home & Garden segment’s sales increased 0.7% to $212 million primarily on growth in repellents and gains from the sale of Rejuvenate, which was completed on May 28 for roughly $300 million. On the flip side, unfavorable weather acted as a headwind for herbicides and insecticides. Organic sales declined 3% year over year in the quarter under review. The segment’s adjusted EBITDA was $53.4 million, down 3.8% from $55.5 million in the prior-year quarter.
Other Financials
Spectrum Brands ended the quarter with cash and cash equivalents of $132.4 million, with an outstanding debt was nearly $2,707 million. Management repurchased shares worth $10.2 million in the quarter under review. It has roughly $478 million available under its $600-million cash flow revolver as of Jul 4, 2021. For fiscal 2021, capital expenditure is estimated to be $70-$80 million. The company boasts liquidity of more than $600 million.
Spectrum Brands Holdings Inc. Price, Consensus and EPS Surprise
Management retained its 2021 view. The company still anticipates sales growth in mid-teens, driven by favorable impacts of foreign currency. Adjusted EBITDA is likely to rise in mid-teens, with transportation and commodity costs of $120-$130 million. It expects adjusted free cash flow of $260-$280 million. Savings from the Global Productivity Improvement Program are envisioned to be $200 million by the end of fiscal 2022.
Image: Shutterstock
Spectrum Brands (SPB) Q3 Earnings Lag Estimates, Sales Beat
Spectrum Brands Holdings Inc. (SPB - Free Report) reported third-quarter fiscal 2021, wherein the bottom line missed the Zacks Consensus Estimate, while sales beat the same. Both the top and bottom lines improved year over year. Results gained from higher investments in marketing and advertising along with product launches. However, elevated inflation pressure, driven by transportation and commodity costs, acted as deterrents.
In the past three months, shares of this Zacks Rank #3 (Hold) company have lost 15.3% compared with the industry’s decline of 18%.
Q3 in Detail
Adjusted earnings from continuing operations of $1.57 per share lagged the Zacks Consensus Estimate of $1.59. However, the bottom line advanced 15.4% from $1.36 in the prior-year quarter on the back of favorable volumes and productivity.
Spectrum Brands’ net sales grew 18.1% year over year to $1,162.8 million and beat the Zacks Consensus Estimate of $1,140 million. Excluding the positive impacts of currency and sales from buyouts, organic net sales advanced 12%, courtesy of growth in all four segments, particularly in Hardware and Home Improvement. Sales also grew 13.8% from third-quarter fiscal 2019. Favorable currency of $25.9 million and acquisition-related gains of $34.3 million also contributed to quarterly sales growth.
Gross profit increased 16.8% year over year to $407.4 million, while gross margin contracted 40 basis points (bps) year over year at 35% due to elevated freight and raw-material costs, which were somewhat offset by a rise in volumes, positive mix and better productivity related to the Global Productivity Improvement Program.
SG&A expenses rose 22.5% to $275.4 million. As a percentage of sales, SG&A expenses increased 90 bps to 23.7%. This can be mainly attributable to higher volumes along with a rise in advertising and marketing costs, and elevated incentive and distribution expenses.
The company reported an operating income of $98 million, up 3.6% year over year. The upside was led by higher volumes, better productivity and reduced restructuring costs, which more than offset elevated freight and raw-material costs as well as higher marketing and advertising investments.
Adjusted EBITDA from continuing operations rose 1.8% to $167.4 million in the fiscal third quarter, driven by solid organic growth in Hardware and Home Improvement. Adjusted EBITDA margin contracted 230 bps to 14.4%.
Image Source: Zacks Investment Research
Segmental Performance
Sales in the Hardware & Home Improvement segment rose 48.8% to $419 million, mainly driven by double-digit growth in all categories, particularly security, owing to strong demand and product launches. The segment’s organic sales rallied 46.7% year over year. Also, adjusted EBITDA in the segment skyrocketed 56% to $68 million on the back of higher volumes, and better productivity, which more than offset COVID-related costs, higher freight and raw-material expenses, and the rise in marketing investments.
Sales in the Home & Personal Care segment increased 9.5% to $274.4 million, backed by growth in small appliances, personal care, hair care and garment care products. Strength in Latin America as stores resumed operations also acted as an upside. Excluding the positive impacts of foreign currency, organic net sales for the segment increased 4.2%. The segment’s adjusted EBITDA of $11.8 million plunged 52.8%, driven by higher volumes and better productivity, which somewhat offset pricing impacts, higher freight and raw-material expenses, and the rise in marketing investments.
The Global Pet Care segment’s sales grew 6.5% year over year to $257.3 million, primarily driven by gains from acquisitions, which, in turn, drove growth in the animal category. Excluding the favorable impacts of foreign currency and sales from acquisitions, organic sales fell 7.2%. The segment’s adjusted EBITDA declined 2.8% to $49.2 million due to distribution center transition, which led to sluggish volumes and higher operating costs.
The Home & Garden segment’s sales increased 0.7% to $212 million primarily on growth in repellents and gains from the sale of Rejuvenate, which was completed on May 28 for roughly $300 million. On the flip side, unfavorable weather acted as a headwind for herbicides and insecticides. Organic sales declined 3% year over year in the quarter under review. The segment’s adjusted EBITDA was $53.4 million, down 3.8% from $55.5 million in the prior-year quarter.
Other Financials
Spectrum Brands ended the quarter with cash and cash equivalents of $132.4 million, with an outstanding debt was nearly $2,707 million. Management repurchased shares worth $10.2 million in the quarter under review. It has roughly $478 million available under its $600-million cash flow revolver as of Jul 4, 2021. For fiscal 2021, capital expenditure is estimated to be $70-$80 million. The company boasts liquidity of more than $600 million.
Spectrum Brands Holdings Inc. Price, Consensus and EPS Surprise
Spectrum Brands Holdings Inc. price-consensus-eps-surprise-chart | Spectrum Brands Holdings Inc. Quote
Guidance
Management retained its 2021 view. The company still anticipates sales growth in mid-teens, driven by favorable impacts of foreign currency. Adjusted EBITDA is likely to rise in mid-teens, with transportation and commodity costs of $120-$130 million. It expects adjusted free cash flow of $260-$280 million. Savings from the Global Productivity Improvement Program are envisioned to be $200 million by the end of fiscal 2022.
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