Prestige Consumer Healthcare (PBH Quick QuotePBH - Free Report) is likely to grow in the coming quarters, backed by continued gain in market share for its wide array of brands, which is a direct outcome of its focused brand-building efforts. U.S. Ear & Eye Care brands and Dermatological sales emerge as the largest category growth drivers in North America.

However, a high debt profile and competitive pressures may pose constraints for Prestige Consumer’s operations.

In the past six months, this Zacks Rank #3 (Hold) stock has gained 24.3% compared with a 9.8% rise of the industry and 15.1% growth of the S&P 500 composite.

The renowned consumer healthcare product company has a market capitalization of $3.57 billion. PBH’s earnings surpassed estimates in three of the trailing four quarters and broke even in one, delivering an average surprise of 2.44%.

Let’s delve deeper.

Upsides

Focus on Brand-Building: Building great brands is the cornerstone of Prestige Consumer’s long-term growth strategy. These long-term brand-building initiatives, combined with efficient marketing, channel development and innovative approaches, have led Prestige’s brands to hold the leading market share position consistently.

One such example is the Goody’s, a brand that the company acquired more than 10 years ago. Prestige Consumer successfully leveraged insights from consumers and expanded with targeted offerings, like Goody's Hangover, to meet ever-evolving product needs and preferences. Goody’s headache powders have grown more than three times than the overall analgesic category in the current fiscal year to date. The success of these products was backed by distinct marketing tactics to attract new customers and deepen connections with existing ones.

Strength of a Diversified Portfolio: Prestige Consumer has a long and successful history in the Eye & Ear Care category with a wide assortment of leading brands like Clear Eyes, TheraTears and Debrox. In the third quarter of 2024, revenue growth was fueled by the impressive Eye & Ear Care category performance in North America and Hydralyte brand growth in the International segment. Strong Ear & Eye Care and Dermatological category sales were the largest category growth drivers in North America in the nine months of the fiscal 2024.

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E-Commerce Strength: In the past years, Prestige developed long-term partnerships across its diverse retail footprint and invested early and heavily in the e-commerce channel. These multi-year investments have been delivering impressive results, continuing the long-term trend of higher online purchasing. The company delivered solid, high single digit year-over-year growth in the e-commerce channel and double-digit consumption growth year to date.

Downsides

Debt Profile: At the end of the fiscal third quarter, Prestige Consumer had a long-term debt of $1.20 billion, while cash and cash equivalents were $63.6 million. The company did not have any near-term debt payable. The debt-to-capital ratio stood moderately leveraged at 42.8%, while times interest earned remained sequentially unchanged at negative 0.3. This suggests that the company might face difficulty in paying off its interest obligations.

Intense Competition: The markets in which Prestige Consumer operates are competitive and include numerous national and global manufacturers, distributors, marketers and retailers. The company faces stiff competition from its peers on the grounds of brand recognition, product quality, performance, value to customers, price and product availability.

Estimate Trend

In the past 90 days, the Zacks Consensus Estimate for PBH’s fiscal 2024 earnings per share has moved up from $4.31 to $4.33.

The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $1.14 billion. This suggests an increase of 0.7% from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK Quick QuoteSYK - Free Report) , Cencora, Inc. (COR Quick QuoteCOR - Free Report) and Cardinal Health (CAH Quick QuoteCAH - Free Report) .

Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.

Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.

COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.7%.

Cardinal Health, carrying a Zacks Rank #1, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.

CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.