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Helen of Troy (HELE) Stock Gains After Q3 Earnings Beat

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Helen of Troy Limited (HELE - Free Report) has been posting positive earnings surprises for the past five quarters. The company continued with this trend in third-quarter fiscal 2017 as well. Shares of the company rose 7.7%, following the company’s better-than-expected results in third-quarter fiscal 2016 on Jan 5, 2016. Adjusted earnings of $2.37 increased 14.5% from the year-ago level. Further, earnings surpassed the Zacks Consensus Estimate of $1.66 by 43%.

The company’s consistent positive performances have made investors bullish on the stock, evident from its share price movement. In fact, the shares of the company have displayed a promising gain of 20% in the last three months, outperforming the Zacks categorized Cosmetics & Toiletries industry which has declined 18.9% in the same time frame.

Revenues and Margins

The designer and marketer of consumer products reported revenues of $444.4 million, down 0.2% from the year-ago level. All the segments except the Housewares segment reported lower year-over-year sales during the quarter. Sales missed the Zacks Consensus Estimate of $449 million by nearly 1%.

However, gross profit gained 6.4% to $194.2 million. Gross margin inflated 270 basis points (bps) to 43.7%, primarily due to positive sales mix in the core business, synergies from the Hydro Flask acquisition, and reductions in product costs. Operating profit gained increased 13.8% year over year to $63.3 million. Operating margin inflated 50 bps to 16.5% of net sales million, on account of improvement in core business gross profit margin, synergies of the Hydro Flask acquisition, improved distributional logistics efficiency and lower outbound freight costs.

Helen of Troy Limited Price, Consensus and EPS Surprise

 

Helen of Troy Limited Price, Consensus and EPS Surprise | Helen of Troy Limited Quote

Segment Details

Housewares: Sales in the Housewares category increased 42% to $86.0 million from the year-ago period, driven by synergies from the Hydro Flask acquisition and strong-core business results. Growth was fueled by addition of new products to the company’s portfolio.

In Mar 2016, Helen of Troy stepped into the outdoor and athletic category by acquiring Hydro Flask and all membership units of Steel Technology, LLC. Hydro Flask is a manufacturer of high performance insulated hydration vessels popular among active lifestyle enthusiasts..

Beauty Care: Sales in this category declined 19.5%, due to soft sales from the company’s Venezuelan and North American personal care businesses, unfavorable foreign currency fluctuations, de-emphasis of the foot care category and rationalization of lower margin business.

Healthcare/Home Environment: Net sales in this category slipped 3.5%, owing to de-emphasis of lower margin hot/cold therapy business and decline in humidification due to the retailer’s exiting last year’s below average flu season with higher inventory levels.

Nutritional Supplement: The company entered the nutritional supplement business in Sep 2014, with the takeover of Healthy Directions, LLC and its subsidiaries. Sales decreased 14.2%, due to lower response rates in the offline channel, lower average order values, increase in discounts to promote buyer file growth, and a decline in the legacy newsletter subscription business.

Other Financial Details

Helen of Troy exited third-quarter fiscal 2016 with cash and cash equivalents of $16.8 million compared to $25.8 million in second-quarter fiscal 2016. Long-term debt amounted to $567.3 million compared with $581.7 million in the previous quarter.

Fiscal 2017 Outlook

Helen of Troy raised fiscal year 2017 earnings guidance to the range of $6.20–$6.50 from $5.85–$6.35, expected previously. The company's guidance was raised following higher-than-expected profit incurred in the third quarter.

The company lowered its net sales revenue guidance to a range of $1.52 to $1.55 billion compared with a range of $1.55 to $1.59 billion, anticipated earlier. This can primarily be attributed to the company’s expectation of persistent weakness of the flu season.

Helen of Troy currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the broader consumer staples sector include Sysco Corporation (SYY - Free Report) , Lancaster Colony Corporation (LANC - Free Report) and Pinnacle Foods Company , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sysco Corporation has an expected earnings growth of 8.6%. Lancaster has an expected earnings growth rate of 3%, while Pinnacle Foods has a long-term growth rate of 6.5%.

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