Prestige Consumer Healthcare Inc. (PBH Quick QuotePBH - Free Report) has been troubled by elevated cost and supply-chain hurdles, which are expected to linger in fiscal 2022. However, the company’s solid brands and e-commerce strength have been upsides. The strength in domestic consumer healthcare demand aided third-quarter fiscal 2022 results, wherein management raised its guidance for the fiscal.

Let’s delve deeper.

Key Headwinds

Prestige Consumer is encountering hurdles related to supply-chain restrictions and cost inflation. For fiscal 2022, management expects a gross margin of about 57%, which reflects supply-chain hurdles and cost-related challenges. However, the company is focused on undertaking price increases to combat inflation.

Apart from this, intense industry competition and volatility in currency translations pose threats to PBH.

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Upsides & Fiscal 2022 View

Prestige Consumer has been on track to transform its business and focus solely on healthcare.  In this regard, the company recently acquired TheraTears and four other over-the-counter consumer brands across the VMS and Cough & Cold categories from Akorn Operating Company LLC. This buyout, concluded in July 2021, contributed to Prestige Consumer’s third-quarter results. Management earlier said that it expects the Akorn acquisition to contribute $40 million to the top line in fiscal 2022. It remains optimistic about TheraTears’ and Clear Eyes’ prospects in the long term. The addition of TheraTears is likely to enhance Prestige Consumer’s footing in the eye care space.

The company has been making multi-year e-commerce investments for a while now, which continued to yield results in the third quarter of fiscal 2022. PBH continued to see double-digit consumption growth in e-commerce sales during the quarter. The upside can be attributed to consumers’ growing shift to online shopping and the company’s constant investments in online content and digital marketing. With more consumers shifting to the online mode of shopping, the e-commerce channel is likely to remain strong and Prestige Consumer’s investments in this arena are likely to keep the company well-placed.
 
Prestige Consumer posted robust third-quarter fiscal 2022 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and grew year over year. The company’s third quarter continued the solid momentum witnessed in the first half. Prestige Consumer benefited from its vast brand portfolio, which helped it register a double-digit revenue increase in several areas, including the greater-than-anticipated recovery in pandemic-impacted areas (like cough & cold), solid international revenues (particularly due to Australia) and the overall strength in domestic consumer healthcare demand.

Driven by impressive quarterly results and anticipation of the continued recovery of certain pandemic-impacted categories like cough & cold (as seen in the third quarter), management raised its fiscal 2022 view. Prestige Consumer’s solid brand portfolio, strict capital deployment and strong financial profile keep it well-placed for top and bottom-line growth in fiscal 2023. For fiscal 2022, the company anticipates revenues in the range of $1,075-$1,080 million, up from the earlier-mentioned view of $1,050-$1,060 million. Organic growth is projected at 9% now compared with the previous guidance of 7%. Finally, PBH envisions adjusted earnings per share (EPS) in the band of $4-$4.04, up from the $3.93-$3.98 range mentioned before. In fiscal 2021, Prestige Consumer’s top and bottom lines were $943.4 million and $3.24 per share, respectively.

Shares of this Zacks Rank #3 (Hold) company have declined 7.9% in the past six months compared with the industry’s drop of 37.1%.

A Renowned Consumer Discretionary Stock

A popular pick from the broader Zacks Consumer Discretionary sector is Crocs, Inc. (CROX Quick QuoteCROX - Free Report) , which has been benefiting from its focus on product innovation and marketing and digital capabilities. Potential gains from the HEYDUDE buyout also bode well. Crocs, which designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories, currently carries a Zacks Rank #3. Shares of CROX have decreased 46% in the past six months. The Zacks Consensus Estimate for Crocs’ current financial-year EPS suggests growth of 22.1% from the year-ago reported figure.

Let’s Check These Solid Bets

Some better-ranked stocks are Funko, Inc. (FNKO Quick QuoteFNKO - Free Report) and Gildan Activewear Inc. (GIL Quick QuoteGIL - Free Report) .

Funko, the pop culture consumer products company, currently sports a Zacks Rank #1 (Strong Buy). Shares of Funko have declined 3.5% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Funko’s 2022 sales and EPS suggests growth of 22.7% and 26.8%, respectively, from the year-ago reported figure. FNKO has a trailing four-quarter earnings surprise of 96.2%, on average.

Gildan Activewear, which manufactures and sells various apparel products, carries a Zacks Rank #2 (Buy) at present. Shares of Gildan Activewear have dipped 1.5% in the past six months.

The Zacks Consensus Estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of 8.9% and 3.3%, respectively, from the year-ago reported figure. GIL has a trailing four-quarter earnings surprise of 66.6%, on average.