Shares of Energizer Holdings, Inc. ENR surged 9.1% before closing yesterday's trading session following the release of its fourth-quarter results. Net sales declined year over year and lagged the Zacks Consensus Estimate. However, earnings improved from the year-ago period and surpassed the consensus estimate.
Energizer’s strategic initiatives include Project Momentum for margin recovery, cash flow restoration and debt reduction. The company focuses on market expansion by leveraging its global platform, investing in innovation to drive growth, enhancing digital commerce capabilities and improving distribution by optimizing customer placement and pursuing new opportunities.
Energizer Holdings, Inc. Price, Consensus and EPS Surprise
Energizer Holdings, Inc. price-consensus-eps-surprise-chart | Energizer Holdings, Inc. Quote
More on ENR’s Q4 Results
Energizer’s adjusted earnings of $1.22 per share beat the Zacks Consensus Estimate of $1.17. Also, the bottom line increased 1.7% from the year-ago quarter’s reported figure.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The company reported net sales of $805.7 million, which lagged the Zacks Consensus Estimate of $809 million and also decreased 0.7% from the year-ago quarter’s reported number. Organic sales were flat year over year. The metric missed our anticipated rate of 0.3% increase for the fiscal fourth quarter.
The Battery & Lights segment experienced a volume increase, fueled by improved category trends and expanded global distribution, leading to 1.3% organic growth. Similarly, the Auto Care segment saw 0.5% organic growth, driven by distribution gains and early holiday sales, although partially offset by the timing of refrigerant sales that had boosted the third quarter.
However, these volume gains were offset by 1.8% decline in pricing, attributed to planned strategic pricing actions and promotional investments during the period.
Energizer's Q4 Sales Insights by Segments
Revenues of Energizer's Batteries & Lights segment declined 0.7% year over year to $651.6 million. The figure lagged our estimate of 0.3% decline. We note that segmental profit increased 1.5% to $179.5 million.
Meanwhile, revenues in the Auto Care segment decreased 0.6% to $154.1 million from the year-ago period. Also, we note that segmental profit increased sharply 13.6% to $20 million.
ENR’s Margin & Cost Details
In the fiscal fourth quarter, Energizer’s adjusted gross margin expanded 220 basis points to 42.2%. The improvement in adjusted gross margin during the fourth fiscal quarter was driven by Project Momentum initiatives, which generated approximately $18 million in savings, along with lower input costs, including favorable commodity and material pricing. These gains were partially offset by planned strategic pricing actions and promotional investments. We expected a gross margin expansion of 150 basis points.
Adjusted SG&A expenses increased 6.5% year over year to $123 million. This rise was due to higher labor and benefit costs, increased travel expenses, elevated depreciation expenses from digital transformation initiatives and higher legal fees. This was partially offset by approximately $7 million in savings from Project Momentum.
Adjusted SG&A costs, as a rate of net sales, was 15.3% compared with 14.2% recorded in the prior-year quarter. We expected adjusted SG&A expenses, as a percentage of net sales, to be 15.5% in the fourth quarter. Advertising and promotion expenses represented 4.6% of sales, an increase of 50 basis points, aligning with the company's enhanced investment in long-term growth initiatives.
Adjusted EBITDA was $187.3 million, up 1% year over year, whereas the adjusted EBITDA margin increased 30 basis points to 23.2%.
Energizer’s Financial Health Snapshot
As of Sept. 30, 2024, Energizer’s cash and cash equivalents were $216.9 million, with long-term debt of $3.19 billion and shareholders' equity of $135.8 million. As of the fiscal fourth quarter, ENR paid down an additional $50 million of debt. At the end of the quarter, the company’s net debt to adjusted EBITDA was 4.9x times.
The operating cash flow as of the fiscal fourth quarter was $168.9 million. The company approved a new share repurchase program for up to 7.5 million shares, replacing the previous outstanding authorization.
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ENR’s Q1 & FY25 Outlook
For the first quarter, organic revenues are forecasted to grow 2% to 3% year over year. Adjusted gross margins are expected to improve 50-100 basis points with adjusted EPS predicted in the range of 60 cents to 65 cents. This representss mid-single-digit growth compared with the prior period.
For fiscal 2025, management anticipates organic revenue growth of 1% to 2%, driven by expanded distribution in both its Battery and Auto Care businesses. Energizer aims to improve its adjusted gross margin by approximately 50 basis points, bringing the number above 41% for the year.
This margin expansion will be driven by cost savings from the ongoing Project Momentum, which is expected to deliver between $40 million and $60 million in fiscal 2025, marking its final year with total cumulative savings expected to be between $180 million and $200 million.
This revenue increase, along with the final implementation phase of Project Momentum initiatives, is expected to drive growth in adjusted EBITDA, anticipated to be between $625 million and $645 million. Adjusted EPS for the year is expected to be between $3.45 and $3.65. Debt reduction remains a priority for Energizer with plans to pay down $150 million to $200 million in fiscal 2025.
Management anticipates capital expenditures to be between $80 million and $90 million, driven by investments in operations, digital enablement, plastic-free packaging and one-time Momentum costs. As a result of these incremental investments, free cash flow is expected to be between 8% and 10% of sales.
Shares of this Zacks Rank #3 (Hold) company have increased 24.1% in the past three months against the industry’s decline of 0.5%.
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