RBC cuts Edgewell Personal Care target to $43, keeps Outperform

On Tuesday, RBC Capital Markets adjusted its outlook on Edgewell Personal Care shares (NYSE:EPC), lowering the price target to $43.00 from the previous $48.00, while continuing to endorse the stock with an Outperform rating. The revision follows the company’s first-quarter results, which slightly missed the consensus estimates. The stock has experienced significant pressure, declining over 9% in the past week and nearly 23% over six months. Analysts at RBC noted that while the fundamental business dynamics remain largely consistent, with international markets outperforming North America and strategic initiatives showing promise, foreign exchange (FX) headwinds have begun to exert more pressure on profitability. According to InvestingPro data, the company maintains strong fundamentals with a healthy current ratio of 1.66 and liquid assets exceeding short-term obligations.

Edgewell Personal Care reported its financial performance for the first quarter, revealing a modest shortfall against market expectations. The company’s international segment continued to perform stronger than its North American operations, aligning with the trends observed in recent quarters. With a gross profit margin of 43% and an EBITDA of $338 million in the last twelve months, the company’s strategic direction, favoring areas where it has a "Right to Win" over those with merely a "Right to Play," remains intact. However, analysts observed that external factors, particularly adverse FX movements, have started to have a more significant impact, a challenge that is not unique to Edgewell but is being faced by others in the Home and Personal Care (HPC) industry as well.

Despite the downward adjustment in profitability outlook due to negative FX influences, RBC Capital maintains its confidence in Edgewell’s strategic initiatives and their potential to yield benefits in the future. The firm’s guidance for organic growth through fiscal year 2025 remains unchanged, suggesting a steady course for the business’s core operations. RBC’s revised price target reflects the recent challenges but also indicates a belief in the company’s ongoing improvement efforts and their eventual contribution to Edgewell’s success.

Edgewell Personal Care’s stock price target adjustment by RBC Capital comes at a time when companies across various sectors are grappling with the implications of currency fluctuations on their international earnings. Despite these challenges, RBC’s analysts see a positive trajectory for Edgewell, backed by the company’s strategic growth initiatives and market positioning. The Outperform rating signals that, in RBC’s view, Edgewell’s shares are expected to perform better than the overall market or sector average over the next 12 months.

In other recent news, Edgewell Personal Care has been the subject of multiple analyst comments following its recent quarterly earnings report. Morgan Stanley (NYSE:MS) reduced their price target for Edgewell from $35.00 to $32.00, maintaining an Underweight rating on the stock. The firm attributed this adjustment to the company’s decision to lower its full-year EPS guidance due to foreign exchange pressures and forecasted weak organic sales growth in the second quarter.

Simultaneously, Canaccord Genuity also adjusted its outlook on Edgewell, reducing the price target to $40 from the previous $53, while continuing to endorse the stock with a Buy rating. The firm cited a combination of factors including currency headwinds and underperformance in certain product categories as reasons for the adjustment.

Edgewell’s recent earnings report revealed a 2.1% decline in reported sales and a 1.3% dip in organic sales, influenced by currency-related setbacks. The company’s adjusted EBITDA came in at $45.9 million, slightly below the consensus estimate, and adjusted earnings per share (EPS) of $0.07 missed the expected $0.12. Despite the current challenges, Edgewell’s organic sales forecast remains positive, with expectations of a 1-3% increase for the fiscal year 2025. These are the latest developments in the ongoing story of Edgewell’s financial performance.

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