Energizer Holdings, Inc. (ENR Quick QuoteENR - Free Report) has posted second-quarter fiscal 2026 adjusted earnings of 94 cents per share, jumping 40.3% year over year and beating the Zacks Consensus Estimate of 47 cents by 100%. The company’s profitability benefited from tariff-related developments and internal margin initiatives.

Net sales of $643.3 million declined 3% from the year-ago quarter and missed the consensus mark of $665 million by 3.3%. Organic net sales declined 5.5%, with the key drag coming from volumes rather than pricing. The metric lagged our prediction of a 4.3% decrease in organic net sales.

ENR's Volume Pressures Reflect Timing & Mix Headwinds

Management said that volume fell 6.1%, reflecting a shift in the timing of battery orders tied to the plastic-free packaging conversion, a slower start to the auto care selling season and modest impacts of the conflict in the Middle East.

Price realization offered a partial offset. Carryover price increases contributed 0.6%, led primarily by the Batteries & Lights segment, helping cushion the demand-driven shortfall. These dynamics framed the quarter as more timing and mix-driven than purely demand-led, even as reported sales still moved lower year over year.

Energizer's Margin & Cost Details

In the fiscal second quarter, adjusted gross profit increased 5.7% year over year to $285.9 million, while the adjusted gross margin expanded 360 basis points to 44.4%, which beat our estimate of 37.9%. The improvement was driven primarily by a $47.6-million tariff refund benefit recorded in cost of goods sold, $11.7 million in production tax credits and benefits from pricing. These gains were partially offset by an unfavorable product mix, higher input costs tied to production inefficiencies from network rebalancing and incremental tariffs incurred during the quarter.

Cost discipline remained a focal point, though the expense mix reflected investment and acquisition effects. Adjusted SG&A expenses rose 2.1% to $127.1 million and, as a percentage of net sales, climbed 100 basis points to 19.8%. We expected adjusted SG&A expenses, as a percentage of net sales, to be 20.1% in the fiscal second quarter. The increase was due to higher costs from the APS business of $3 million, investments in digital transformation and growth initiatives, and unfavorable currency, partially offset by approximately $4 million in Project Momentum savings. 

Advertising and promotion expenses decreased 8.7% year over year to $19 million, providing a modest offset to the higher SG&A rate. Advertising and Promotion expenses were 3% of net sales in the fiscal second quarter compared with 3.1% in the same quarter last year.

Adjusted EBITDA grew 13% year over year to $158.6 million, supported by the step-up in adjusted gross margin, and lower A&P and R&D spending. The adjusted EBITDA margin expanded about 350 basis points to 24.7%.

ENR Batteries & Lights Segment’s Margin Expands on Execution

Net sales in the Batteries & Lights segment decreased 3% year over year to $473.2 million, which missed our estimate of $492.4 million. Organic net sales declined 5.9%, primarily reflecting the timing of shipments tied to the plastic-free packaging transition and a modest impact of the conflict in the Middle East, partially offset by pricing and distribution gains tied to the APS integration.

Segment profit increased 19.1% to $133.7 million, with segment profit margin expanding 530 basis points to 28.3%. Management linked the improvement to pricing, production credits and recognition of anticipated tariff recoveries, which helped offset product mix pressures and input cost challenges tied to ongoing network rebalancing.

Energizer's Auto Care Faces Softness but Improves Sequentially

Auto Care results remained pressured by weaker consumption in certain categories and a tough comparison against the prior-year launch dynamics of Armor All Podium Series. The Auto Care segment posted net sales of $170.1 million, which missed our estimate of $174.7 million and edged down 2.7% year over year, with organic net sales declining 4.5%. Results reflected weaker consumption in certain areas and the lapping of the initial sell-in from the Armor All Podium Series launch, which had boosted the prior-year comparison.

Segment profit declined 18.8% to $28.6 million, while segment profit margin fell 330 basis points to 16.8%. Still, management emphasized a notable sequential margin recovery, citing a 710-basis-point improvement from the prior quarter that included tariff-related benefits. Excluding the tariff benefit, the company noted a sequential improvement of 420 basis points, supported by pricing, production efficiencies and tighter cost discipline.

ENR's Cash Flow Supports Deleveraging & Shareholder Returns

Energizer ended the second quarter of fiscal 2026 with cash and cash equivalents of $172.5 million, long-term debt of $3.30 billion, and shareholders’ equity of $173.2 million.

For the first six months of fiscal 2026, Energizer generated $147.8 million in operating cash flow and $105.9 million in free cash flow, representing 7.4% of net sales. Shareholder returns were maintained through dividends, as the company paid out $20.6 million in the quarter, or 30 cents per share, while keeping debt reduction as the top capital allocation priority.

Energizer’s APS Contribution Remains Modest in Q2

The Advanced Power Solutions acquisition, completed on May 2, 2025, added a small but measurable lift to reported results in the quarter ended March 31, 2026. Management quantified the APS contribution at $2.1 million in net sales for the period.

While the quarter’s acquisition benefit was not large enough to change the top-line trajectory, ENR continues to position APS integration as part of its broader growth and distribution strategy. The focus remains on improving the quality of distribution and strengthening the branded portfolio as the year progresses.

Energizer's Outlook Tilts to High End of Earnings Range

Looking ahead, growth in the second half of the year is expected to be driven primarily by execution rather than any improvement in the consumer environment. The company sees a clear path to growth based on current category trends, supported by expanded distribution and continued innovation. The Armor All Podium Series has scaled significantly, now reaching more than 25,000 stores from around 15,000 earlier, while Energizer Ultimate Child Shield, launched in March, has already secured distribution across major U.S. and international retailers.

Profitability is expected to improve through the combined impacts of pricing actions and ongoing supply-chain optimization initiatives. These efforts are aimed at strengthening margins while enhancing overall operational efficiency.

In the fiscal third quarter, the company expects low-single-digit organic net sales growth, supported by distribution gains, APS integration progress, innovation within Batteries & Lights, and pricing benefits. The adjusted gross margin is projected to be 40%, reflecting pricing, tariff-related benefits and improved network performance. Adjusted earnings per share are expected between 75 cents and 85 cents (excluding the prior year’s one-time 35 cents per share benefit), which implies low-single-digit growth at the mid-point.

For fiscal 2026, net sales are expected to grow at a low-single-digit rate, while organic net sales are projected to remain roughly flat, with growth returning in the back half. The adjusted gross margin is expected to be 40% to 41%, supported by pricing, supply-chain improvements and tariff-related benefits, with fourth-quarter margins expected to remain above 40%, even after cycling tariff recovery benefits.

ENR expects to deliver full-year adjusted earnings at the high end of the previously issued $3.30-$3.60, with adjusted EBITDA also targeted at the high end of $580-$610 million. The improvement in margins and earnings is largely driven by tariff recoveries, which the company intends to use not only for margin recovery but also to reinvest in initiatives that enhance the durability and long-term strength of earnings.

ENR Stock's Past 3-Month Performance

Image Source: Zacks Investment Research

Shares of this Zacks Rank #3 (Hold) company have lost 16.3% in the past three months compared with the industry’s decline of 9.1%.

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