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Prestige Brands (PBH) Beats on Q1 Earnings, Plans Name Change

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Prestige Brands Holdings Inc. (PBH - Free Report) came out with first-quarter fiscal 2019 results, with earnings and sales beating the Zacks Consensus Estimates. Nevertheless, revenues were marred due to change in accounting policies and packaging expenses of certain brands. Also, revenues during the quarter remained dismal across most segments.

Along with first-quarter results, the company announced plans to change its corporate name to Prestige Consumer Healthcare, Inc. This move reflects the company’s intention to focus on the healthcare segments. Progressing along such lines, the company recently divested the cleaning business.  

That said, lets delve into the quarterly performance and management’s plans for fiscal 2019.

Q1 in Details

The company posted adjusted earnings of 68 cents per share, up 3% from the year-ago quarter’s figure. Also, the figure surpassed the Zacks Consensus Estimate of 66 cents.

Total revenues of $254 million beat the Zacks Consensus Estimate of $253.3 million.  However, the top line inched down 1% year over year, as strong consumption trends in several brands were more than offset by change in accounting policies and packaging expenses of Goody’s and BC brands.

Gross profit came in at $140.6 million, reflecting a decline of 2% from the prior-year quarter’s figure. Also, adjusted gross margin declined 50 basis points (bps) to 55.4% in fiscal first quarter.

Moreover, adjusted EBITDA was $80.8 million, down 7.7% year over year. Adjusted EBITDA margin contracted 300 bps to reach 32.4%.

Prestige Brand Holdings, Inc. Price, Consensus and EPS Surprise

Segment Performance

Revenues in the North American OTC Healthcare segment amounted $ 214.8 million, down 0.5% year over year. Consumption growth in the company’s core OTC brands were more than offset by change in revenue recognition accounting policies as well as the launch of new packaging for BC and Goody’s brands.  

Revenues in the International OTC Healthcare segment totaled $19.4 million, down 7.2% from the year-ago quarter’s tally. The downside was caused by timing differences in shipments and distributor orders.

Further, revenues in the Household Cleaning segment amounted to $19.8 million, down 0.2% from the year-ago quarter’s tally.  Notably, on July 2, the company completed the divestiture of the segment for $69 million. Proceeds of $50 million from the sale were utilized to lower debt burden.

Financial Updates

The company exited the quarter under review with cash and cash equivalents of $34.3 million, long-term debt of $1,993.8 million and shareholders’ equity of $1,161.7 million. Net cash from operating activities in the quarter was $55.9 million.

Further, in first-quarter fiscal 2018, the company completed the repurchase of 1.4 million shares for $50 million.



Will Divestiture Uplift the Stock?

Prestige Brands’ sluggish Household Cleaning business has been dampening the company’s performance. Hence, management’s decision to sell the unit is rational and expected to help the company focus on other prospects like healthcare. Notably, the company’s healthcare portfolio consists of strong brands that have adequate long-term growth prospects. With this in mind, Prestige Brands plans to emerge as a company focused entirely on healthcare. Well, management has already commenced initiatives to achieve the target by announcing corporate name change. We expect that such well-chalked initiatives will enable the company to efficiently utilize resources and revive share price performance. Notably, shares of this Zacks Rank #4 (Strong Selll) company declined 3.1% in the past six months compared with the industry’s 13.5% rise.

Outlook

The company updated fiscal 2019 outlook, considering the divestiture of the company’s cleaning business. Management expects revenues in the range of $985-$995 million. Further, adjusted earnings per share are projected in the range of $2.84-$2.92.

Additionally, Prestige Brands is striving to improve freight and warehouse cost. Additionally, management expects to sustain strong consumption trends in core brands to in the upcoming quarters.

Looking for More Consumer Discretionary Stocks? Check These

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Deckers Outdoor Corporation (DECK - Free Report) , with long-term earnings per share growth rate of 11.3%, carries a Zacks Rank #2.

Guess?, Inc (GES - Free Report) , a Zacks Rank #2 company, delivered an average positive earnings surprise of 29% in the trailing four quarters.

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