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Will Online Strength Aid Helen of Troy (HELE) in Q1 Earnings?

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Helen of Troy Limited (HELE - Free Report) is slated to release first-quarter fiscal 2019 results on Jul 9. This consumer products player has delivered positive earnings surprise for eleven straight quarters now. Let’s see what’s in store for the company this time around.

Helen of Troy Limited Price and EPS Surprise
 

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

Factors Driving Helen of Troy

Helen of Troy is likely to continue gaining from its Transformation Plan, which concentrates on making investments in core areas, undertaking customer-centric innovations, undertaking prudent mergers and acquisitions, building superior shared services, making upgrades to workforce and systems, and reducing wastage to improve quality and curtail costs. These factors drove Helen of Troy in the last reported quarter, wherein top and bottom lines improved year over year and came ahead of the Zacks Consensus Estimate.

Results were driven by solid performance by Leadership Brands along with growth in online sales. Markedly, Helen of Troy has been focused on making solid investments in its Leadership Brands, which are considered most productive as they have been delivering robust results.

To this end, the company is on track with its investments in product launches, marketing efforts and e-commerce strategies for these brands, which are the highest margin, greatest volume generating and most efficient businesses for the company. Further, the company is likely to keep gaining from its consistent online sales and digital marketing efforts, on the back of which online sales increased in all three segments in the fourth quarter of fiscal 2018. Talking of segments, the company’s Health & Home unit delivered one of its best quarters in a long time.

Will the Hurdles Be Offset?

However, the company’s Beauty segment sales did not witness even a single quarter of year-over-year growth, throughout fiscal 2018. The Beauty segment has been suffering from softness in personal care category, mainly due to tough competition. In the fourth quarter, Beauty segment sales fell 2.1% on account of weakness across brick and mortar channels. Further, Beauty sales are projected to dip in low to mid-single digits in fiscal 2019, which remains a concern for the top line in the quarter under review as well.

Also, on the cost front, the company witnessed contraction in gross and operating margin in the fourth quarter. Gross margin fell 30 basis points, due to increased promotions and adverse channel mix. Further, SG&A expenses as a percentage of sales escalated 60 basis points on account of increased incentive compensation, and higher advertising and new product development costs, among others.

Well, overall rise in commodity and transportation costs creates a competitive pricing environment, which keeps margins under pressure. Moreover, management expects fiscal 2019 bottom-line growth to be hit by a rise in investments to fuel the company’s Leadership Brands.  

Nonetheless, the aforementioned growth drivers as well as Helen of Troy’s Project Refuel should help the company overcome these hurdles. The Project Refuel restructuring plan was initiated to improve the performance of the company’s Beauty and Nutritional Supplements units. After the sale of Nutritional Supplements, management continues to target generating annualized profit growth of nearly $8.0 million over the tenure of this strategic plan.

Q1 Estimates in Numbers

Analysts polled by Zacks expect total revenues of $333 million, down 7.5% from the year-ago period. The current consensus mark for earnings is pegged at $1.33, which shows a 3.9% jump from the year-ago period. Notably, the earnings estimates witnessed a 6.7% uptrend in the past 30 days.

What the Zacks Model Unveils

Our proven model doesn’t show that Helen of Troyis likely to beat bottom-line estimates this quarter.  For this to happen, the stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Helen of Troy carries a Zacks Rank #3, the company’s Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:

Church & Dwight (CHD - Free Report) has an Earnings ESP of +1.17% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Estee Lauder (EL - Free Report) , a Zacks #3 Ranked stock, has an Earnings ESP of +0.81%.

Tyson Foods (TSN - Free Report) , a Zacks #3 Ranked company, has an Earnings ESP of +1.64%.

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