We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Spectrum Brands Down 40% In a Year: What Caused Dismal Run?
Read MoreHide Full Article
Spectrum Brands Holdings, Inc. (SPB - Free Report) has been navigating through rough waters for a while now, thanks to input cost inflation along with higher operating and distribution costs. Also, foreign currency remains another headwind for the company.
All these weighed upon the company’s first-quarter fiscal 2019, wherein both the top and the bottom line missed the Zacks Consensus Estimate. Further, loss per share and sales reflected significant decline year over year due to lower volumes, adverse currency and sales decline in most segments. Operating margin was also hurt by higher operating expenses. (Read: Spectrum Brands Stock Down 18% on Q1 Loss & Sales Miss)
Consequently, the Zacks Consensus Estimate has been witnessing a downtrend lately. We note that estimates for current and next year have moved south by 3 cents and 14 cents to $4.31 and $4.28, respectively, over the past 60 days.
In the past one year, this Zacks Rank #5 (Strong Sell) stock tumbled approximately 40%, wider than the industry’s decline of 21.9%. Let’s take a closer look at the factors impacting the stock’s performance.
Factors Behind Spectrum Brands’ Dismal Spell
Increased selling, general and administrative expenses along with other operating expenses weighed on operating margin in first-quarter fiscal 2019. The company reported operating income of $24.8 million, which plunged 51.7% from the year-ago period. Operating margin contracted 280 basis points in the fiscal first quarter. Meanwhile, lower volumes, input cost inflation, unfavorable product mix and operating expense deleverage have been hurting EBITDA.
The adjusted EBITDA fell 13.1%, with margin contraction of 120 bps due to elevated distribution and advertising costs coupled with adverse product mix. Management expects increased spending on marketing and advertising as well as product developments and innovations to continue hurting margins.
Moreover, the company remains exposed to major foreign currency risks due to its cross-border presence, which has been weighing on the company’s performance. Foreign exchange headwinds marred net sales for first-quarter fiscal 2019 by $13.6 million. Currency headwinds also negatively impacted the company’s Hardware & Home Improvement, Home & Personal Care and Global Pet Supplies segments’ sales by $1.6 million, $10.2 million and $1.8 million, respectively, in the reported quarter. In fiscal 2019, negative foreign currency translations are expected to hurt sales by roughly 150 bps.
The company is facing intense competition from numerous well-established players and distributors of consumer and commercial products.
Nevertheless, the company’s measures to transform business portfolio, via strategic agreements and divestitures, bode well. Moreover, its focus on reducing debt should materially aid capital structure in fiscal 2019.
However, these efforts will take time to yield results.
PCM, Inc. has a long-term earnings growth rate of 20% and a Zacks Rank #2.
B&M European Value Retail S.A. (BMRRY - Free Report) has a long-term earnings growth rate of 13.5% and a Zacks Rank #2.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
Image: Bigstock
Spectrum Brands Down 40% In a Year: What Caused Dismal Run?
Spectrum Brands Holdings, Inc. (SPB - Free Report) has been navigating through rough waters for a while now, thanks to input cost inflation along with higher operating and distribution costs. Also, foreign currency remains another headwind for the company.
All these weighed upon the company’s first-quarter fiscal 2019, wherein both the top and the bottom line missed the Zacks Consensus Estimate. Further, loss per share and sales reflected significant decline year over year due to lower volumes, adverse currency and sales decline in most segments. Operating margin was also hurt by higher operating expenses. (Read: Spectrum Brands Stock Down 18% on Q1 Loss & Sales Miss)
Consequently, the Zacks Consensus Estimate has been witnessing a downtrend lately. We note that estimates for current and next year have moved south by 3 cents and 14 cents to $4.31 and $4.28, respectively, over the past 60 days.
In the past one year, this Zacks Rank #5 (Strong Sell) stock tumbled approximately 40%, wider than the industry’s decline of 21.9%. Let’s take a closer look at the factors impacting the stock’s performance.
Factors Behind Spectrum Brands’ Dismal Spell
Increased selling, general and administrative expenses along with other operating expenses weighed on operating margin in first-quarter fiscal 2019. The company reported operating income of $24.8 million, which plunged 51.7% from the year-ago period. Operating margin contracted 280 basis points in the fiscal first quarter. Meanwhile, lower volumes, input cost inflation, unfavorable product mix and operating expense deleverage have been hurting EBITDA.
The adjusted EBITDA fell 13.1%, with margin contraction of 120 bps due to elevated distribution and advertising costs coupled with adverse product mix. Management expects increased spending on marketing and advertising as well as product developments and innovations to continue hurting margins.
Moreover, the company remains exposed to major foreign currency risks due to its cross-border presence, which has been weighing on the company’s performance. Foreign exchange headwinds marred net sales for first-quarter fiscal 2019 by $13.6 million. Currency headwinds also negatively impacted the company’s Hardware & Home Improvement, Home & Personal Care and Global Pet Supplies segments’ sales by $1.6 million, $10.2 million and $1.8 million, respectively, in the reported quarter. In fiscal 2019, negative foreign currency translations are expected to hurt sales by roughly 150 bps.
The company is facing intense competition from numerous well-established players and distributors of consumer and commercial products.
Nevertheless, the company’s measures to transform business portfolio, via strategic agreements and divestitures, bode well. Moreover, its focus on reducing debt should materially aid capital structure in fiscal 2019.
However, these efforts will take time to yield results.
Key Picks
Acme United Corp. (ACU - Free Report) has a long-term earnings growth rate of 10% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PCM, Inc. has a long-term earnings growth rate of 20% and a Zacks Rank #2.
B&M European Value Retail S.A. (BMRRY - Free Report) has a long-term earnings growth rate of 13.5% and a Zacks Rank #2.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>