Amid constant struggles with high costs and stiff competition, Prestige Brands Holdings Inc (PBH - Free Report) has managed to stay afloat on the back of well-woven strategies. The company has been gaining from acquisitions as well as strong consumption trends in the healthcare category. In fact, these factors have aided this Zacks Rank #3 (Hold) stock to gain 18.8% in the past six months compared with the industry’s rise of 9.1%.
Buyouts Aid Growth
Prestige Brands pursues strategic mergers and acquisitions to augment portfolio strength. Notable amongst such moves is the acquisition of Fleet in January 2017. This buyout is among the company’s largest transactions. In fact, the company is on track with building brands under the Fleet banner, such as Summer's Eve. In 2012, the company acquired BC and Goody's that enhanced distribution as well as enabled better customer reach. Other noteworthy acquisitions include DenTek Holdings, Inc in 2016 and Hydralyte in 2015.
Focus on Healthcare Bodes Well
Prestige Brands boasts strong consumption trends in some of its core brands, especially in the healthcare category. In fact, during the first quarter of fiscal 2019, strong consumption trends were witnessed in the North American OTC Healthcare segment. Prompted by the sustained growth in this arena, Prestige Brands recently revealed plans to completely transform business to focus solely on healthcare. Well, management has already commenced initiatives to achieve the target by announcing corporate name change to Prestige Consumer Healthcare, Inc. This move is an important milestone for the company that prides on a strong portfolio of healthcare brands. Moreover, management stated that focusing on areas that have greater growth prospects, such as healthcare, will aid in utilizing resources efficiently.
Efforts to Counter Challenges
Sluggishness in the Household Cleaning business has been dampening the company’s performance. Stiff competition and sluggish brands have been marring the segment for a while. Thanks to such soft trends, the company announced the divestiture of the household cleaning business in July 2018, for approximately $69 million. The move is expected to enable Prestige Brands focus more on healthcare business, as discussed above.
Additionally, we note that the company is facing year-over-year hikes in cost of sales for quite some time. Nevertheless, favorable impacts from tax rates aided the company cushion such headwinds in the first quarter of fiscal 2019. We expect such gains to continue and offset cost-related concerns.
With such well-chalked strategies up its sleeves, we expect Prestige Brands to continue boosting investors’ optimism.
Looking for Consumer Discretionary Stocks? Check These
Columbia Sportswear Company (COLM - Free Report) , sporting a Zacks Rank #1 (Strong Buy), came up with an average positive earnings surprise of 79.3% in the trailing four quarters. It has a long-term earnings growth rate of 10.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
lululemon athletica inc. (LULU - Free Report) also sporting a Zacks Rank #1, came up with an average positive earnings surprise of 19.2% in the trailing four quarters.
Ralph Lauren Corporation (RL - Free Report) , with a Zacks Rank #2 (Buy), has a solid earnings surprise history. The company has a long-term earnings growth rate of 9.6%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>