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On Tuesday, Spectrum Brands (NYSE:SPB), currently trading at $71.26, received a vote of confidence from Oppenheimer as the firm maintained its Outperform rating and $105.00 price target for the company’s stock. The endorsement comes amidst a period of market challenges, with Spectrum Brands’ management effectively steering the company through turbulent times. According to InvestingPro data, the stock is trading near its 52-week low of $68.74, potentially presenting an opportunity for value investors.
The Home & Garden (H&G) division is highlighted as a particularly strong performer, experiencing share gains, optimized retailer inventory, and a portfolio of value brands that are more resistant to economic downturns. On the other hand, the Pet supplies segment has encountered a downturn with a weaker consumer demand in the United States since the start of the year, although performance in Europe and Latin America has remained steady.
Spectrum Brands’ non-core Home Personal Care (HPC) business is also navigating through softer consumer demand in the U.S. and is expected to shoulder approximately half of the company’s projected $80 million to $90 million tariff burden. The ongoing sale or separation process of the HPC division is currently uncertain, largely due to the unpredictability of tariffs.
Despite these challenges, Oppenheimer’s analysis suggests that Spectrum Brands is undervalued, trading at approximately 6.5 times its forecasted FY25 EBITDA, which is notably lower compared to peers like Central Garden & Pet Company and The Scotts Miracle-Gro Company (NYSE:SMG), which trade at around 9 and 11 times, respectively. The firm notes that Spectrum Brands has low leverage and is on track to transition into a focused Pet and Home & Garden company.
The report concludes by noting that while quarterly EBITDA estimates have been adjusted, the forecast for FY25 remains unchanged, and the Outperform rating is sustained.
In other recent news, Spectrum Brands reported its fourth-quarter 2024 earnings, exceeding analysts’ expectations with an earnings per share (EPS) of $1.02, surpassing the forecasted $0.91. However, the company’s revenue for the quarter slightly missed expectations, coming in at $700.2 million compared to the anticipated $705.9 million. Despite the earnings beat, Spectrum Brands’ stock experienced a decline in pre-market trading. The company has launched the "Superior Delivers" initiative aimed at improving EBITDA, which reached $159.1 million for the quarter. For the full year, adjusted EBITDA increased by $40.8 million to $455.5 million. Looking forward, Spectrum Brands anticipates an 8% growth in adjusted EBITDA for 2025. Meanwhile, UBS maintained its ratings for several Consumer Staples companies, including Spectrum Brands, with a ’Buy’ rating, reflecting a steady outlook amid sector challenges.
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