Energizer shares gets an upgrade to Buy rating from Truist Securities

Truist Securities revised its rating on Energizer Holdings (NYSE: NYSE:ENR), moving from a "Hold" to a "Buy" status, and increased the stock's price target to $40, up from the previous $30. The adjustment comes as the analyst at Truist Securities sees potential easing of the factors that have been keeping the stock at a lower valuation compared to its peers.

The analyst cited two main reasons for the upgrade. Firstly, the negative perception of the battery category, which was intensified by the volatility during the COVID-19 pandemic, is expected to change. Secondly, concerns about Energizer's high leverage ratio in a climate of rising interest rates are anticipated to diminish.

The analyst expressed confidence that the overhang affecting Energizer's stock due to these issues would begin to lessen. This optimism is based on the belief that the battery segment is on the cusp of returning to organic growth and that improvements in the US interest rate environment are on the horizon.

Energizer Holdings, known for its batteries and lighting products, has faced investor skepticism, but the new outlook suggests a shift in sentiment. The revised price target of $40 represents a significant increase and reflects the analyst's expectation of the stock's upward trajectory over the next 12 months.

The updated rating and price target for Energizer Holdings by Truist Securities indicates a more positive outlook for the company's stock, as it is seen to be moving past the challenges that have previously weighed on its market performance.

Energizer Holdings, Inc. reported significant financial growth and margin expansion in the third quarter of fiscal year 2024. The company experienced a 1.2% rise in organic net sales and a substantial 46% increase in adjusted earnings.

Energizer also emphasized its success in margin recovery, free cash flow restoration, and debt reduction. For the fourth quarter and full fiscal year, the company anticipates flat organic net sales but improved gross margins and adjusted EPS of $1.10 to $1.20.

Despite recording a one-time non-cash impairment charge of $111 million on certain intangible assets, Energizer remains bullish about its future. The company's strong free cash flow generation has enabled significant debt reduction, and it expects a normal holiday season to boost Q4 performance.

InvestingPro Insights

Following the recent upgrade by Truist Securities, a closer look at Energizer Holdings (NYSE: ENR) through InvestingPro metrics reveals a nuanced picture of the company's financial health and market potential. The market capitalization of Energizer stands at approximately $2.18 billion, indicative of its size within the industry. Despite a challenging revenue growth rate of -1.59% over the last twelve months as of Q3 2024, the company maintains a robust gross profit margin of 40.35%, suggesting effective cost management relative to its sales.

One of the InvestingPro Tips highlights that Energizer is trading at a high Price/Earnings (P/E) ratio of 215.07, which may raise questions about the stock's valuation relative to its earnings. However, it's important to note that the adjusted P/E ratio for the same period is significantly lower at 9.15, potentially offering a more favorable perspective for investors considering the stock's future earnings potential. Additionally, the company's strong free cash flow yield is underscored as a positive sign, implying that Energizer is generating sufficient cash flows relative to its share price.

Investors should be aware that six analysts have revised their earnings estimates downwards for the upcoming period, which may influence the stock's short-term performance. Nevertheless, the company is expected to remain profitable this year, with profitability sustained over the last twelve months. For those looking for more insights, InvestingPro offers additional tips on Energizer, which can be found at https://www.investing.com/pro/ENR.

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