On Wednesday, Energizer Holdings Inc (NYSE:ENR) stock received a reaffirmation of its Outperform rating and $40.00 price target from Evercore ISI. The company's shares saw a 10% increase following a report of earnings surpassing expectations, driven by cost savings.
Energizer's forward-looking statement for fiscal year 2025 suggests a positive start to the quarter, with anticipated sales growth of 2-3% in December, partly thanks to hurricane-related purchases made in October.
Energizer's forecast comes at a time when the company has a clear view of retailers' orders and merchandising schedules for the upcoming toy and consumer electronics season.
The company trades at an enterprise value to EBITDA (EV/EBITDA) ratio of 8x, which is a 40% discount compared to Staples. This valuation reflects the market's deep skepticism regarding the sustainability of battery demand.
The company's analysis indicates that battery purchases, often made sporadically and out of immediate necessity, are not typically memorable for consumers. However, Energizer expects battery sales to grow at a rate consistent with household formation, setting a conservative target for fiscal year 2025 of 1% to 2% growth.
Additional growth is anticipated to come from distribution improvements and fractional share gains, contributing another percentage point to the target.
Energizer also plans to capitalize on the growing e-commerce sector, which already accounts for 20% of the U.S. market. The company intends to fund this strategic shift by reinvesting a portion of the $40-60 million in savings, which could improve margins by 150-200 basis points. This investment represents a significant step in adapting to changing consumer purchasing behaviors and leveraging online sales channels.
In other recent news, Energizer Holdings Inc. reported fourth-quarter results that exceeded analyst expectations, posting adjusted earnings per share of $1.22, surpassing the consensus estimate of $1.17, and revenue of $805.7 million, slightly over Wall Street's forecast of $805.59 million.
For the full fiscal year 2024, Energizer reported adjusted EPS of $3.32, marking a 7% increase from the previous fiscal year, despite a 2.5% decline in revenue to $2.89 billion. JPMorgan upgraded Energizer stock from Underweight to Neutral, expecting a steadier performance in both revenue and earnings for the battery manufacturer in the foreseeable future.
This upgrade was attributed to Energizer's improved sales prospects, driven by volume growth and an expansion of shelf space in stores. Truist Securities reaffirmed a Buy rating for Energizer, while JPMorgan maintained its Underweight rating.
Looking forward to fiscal year 2025, Energizer provided financial guidance projecting an organic revenue increase of 1% to 2%, and an adjusted EPS range of $3.45 to $3.65. The company also managed to reduce its net leverage to 4.9 times in fiscal 2024, aided by a $200 million debt pay down and adjusted EBITDA growth.
InvestingPro Insights
Energizer Holdings' recent performance and future outlook are further illuminated by InvestingPro data and tips. The company's market cap stands at $2.67 billion, with a P/E ratio of 21.97 (adjusted for the last twelve months as of Q4 2024), suggesting a relatively high valuation compared to earnings. This aligns with the InvestingPro Tip that Energizer is "trading at a high earnings multiple."
Despite the market's skepticism about battery demand sustainability, Energizer's financials show some positive indicators. The company's revenue for the last twelve months as of Q4 2024 was $2.887 billion, with a gross profit margin of 40.94%. An InvestingPro Tip highlights that "net income is expected to grow this year," which could support the company's ambitious growth plans and strategic investments in e-commerce.
Interestingly, Energizer's stock has shown strong recent performance, with a 29.25% price total return over the last three months. This is reflected in the InvestingPro Tip noting a "significant return over the last week" and "strong return over the last three months." These metrics suggest that investors are responding positively to Energizer's cost-saving measures and growth outlook.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for Energizer Holdings, providing deeper insights into the company's financial health and market position.
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