UBS cuts Edgewell Personal Care target to $31, keeps neutral rating

On Tuesday, UBS analyst Peter Grom revised the price target for Edgewell Personal Care (NYSE:EPC) shares, reducing it to $31 from $36, while maintaining a Neutral rating on the stock. The adjustment follows Edgewell’s first-quarter earnings per share (EPS) of $0.07, which fell short of the consensus estimate. The lower performance was attributed to unfavorable foreign exchange movements and below-the-line items that overshadowed the company’s stronger-than-expected organic sales growth and gross margin of 43.09%. According to InvestingPro data, the company maintains healthy fundamentals with a current ratio of 1.66, indicating strong liquidity.

Despite the earnings miss, Edgewell maintained its full-year 2025 outlook for revenue and earnings, although it now expects the latter to be at the lower end of its forecast range, again due to negative foreign exchange impacts. In response to the earnings report, Edgewell’s stock experienced a significant drop, trading 9% lower at $28.21 and having dipped as much as 14% earlier in the day. InvestingPro analysis shows the stock is currently trading significantly below its Fair Value, with multiple ProTips suggesting potential value opportunity.

Grom commented on the market’s reaction to Edgewell’s earnings, suggesting that the sharp decline in share price might be an overreaction, especially considering the negative sentiment and underperformance that preceded the company’s earnings announcement. He pointed out that the current valuation, at 9 times the next twelve months’ EPS estimates, represents a 50% discount compared to peers, which is more pronounced than the long-term average discount of 30%. This valuation indicates that market expectations are low, potentially offering a favorable risk/reward scenario. This view is supported by InvestingPro data, which shows an attractive free cash flow yield of 13% and identifies the stock as being in oversold territory. Subscribers can access 8 additional ProTips and a comprehensive Pro Research Report for deeper insights.

However, Grom also acknowledged the importance of top-line visibility in the Staples sector and noted that Edgewell has only once, out of the last six quarters, achieved organic growth in line with its long-term growth algorithm. This inconsistency raises questions about the company’s ability to achieve its forecasted growth in the second half of the year. While a more convincing growth trajectory could prompt a reevaluation of his stance, for the time being, Grom prefers to remain cautious.

Edgewell Personal Care’s stock movement on Tuesday reflects the immediate investor response to the company’s latest financial results and UBS’s updated price target and outlook.

In other recent news, Edgewell Personal Care has been the subject of recent adjustments by various financial firms following its first-quarter results. RBC Capital Markets cut its price target for Edgewell to $43, maintaining an Outperform rating, noting the effects of foreign exchange headwinds on profitability despite consistent business dynamics. Similarly, Morgan Stanley (NYSE:MS) reduced its price target from $35 to $32, continuing an Underweight rating due to a shortfall in first-quarter earnings per share and lowered full-year EPS guidance.

Canaccord Genuity also adjusted its outlook, reducing the price target to $40 while maintaining a Buy rating. The firm cited currency headwinds and underperformance in certain product categories as reasons for the adjustment. Despite these challenges, Edgewell’s management emphasized the company’s international growth and the positive trajectory of its Right to Win businesses.

Edgewell’s first-quarter results revealed a 2.1% decline in reported sales and a dip in organic sales by 1.3%, influenced by approximately $4 million in currency-related setbacks. The company’s adjusted EBITDA came in at $45.9 million, just below the consensus estimate of $46.8 million, and adjusted earnings per share of $0.07 missed the expected $0.12. Despite these challenges, Edgewell’s organic sales forecast remains positive, with expectations of a 1-3% increase for the fiscal year 2025.

These recent developments reflect the ongoing challenges faced by the company, including currency headwinds and market performance, but also highlight the firm’s strategic initiatives and potential for future growth.

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