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On Friday, Canaccord Genuity adjusted its stance Spectrum Brands Holdings Inc . (NYSE:), moving from a Buy to a Hold rating, while raising the price target to $86 from $83. The rating change follows the company’s recent earnings release, which revealed sales numbers that were about 3% above consensus. Despite better-than-expected sales, Spectrum Brands experienced a 4.6% decline in organic sales, due to reduced consumer interest in kitchen appliances within its Home & Personal Care segment, softness in Pet Specialty, and SKU rationalization in both Global Pet Care and Home and Personal Care.
The company’s earnings metrics appeared stronger than analysts’ expectations, thanks to effective pricing strategies and cost-cutting measures that compensated for reduced volumes and continued investment. Spectrum Brands previously delivered subpar fourth-quarter results in November, but maintained investor confidence through an aggressive share buyback program, repurchasing $826 million in stock at an average price of more -about $75 per share since the HHI deal closed in June.
The analyst noted that while there is significant potential for additional buybacks, with more than $700 million available to reach the target leverage ratio of 2.0x-2.5x, the stock is up more than 25% since the deal suggests that the market now recognizes this more. value.
“We also note that the company needs to make material progress in its P&L by 2024 for us to maintain our constructive stance, and that the top line recovery, which we believe is priced in at this point, takes more longer than we thought. We believe Q1 results “where organic sales fell 4.6%, but EBITDA increased 33% ” are an aberration and the company will need to show meaningful and consistent top line growth to expand further,” analysts said.
Shares of Spectrum Brands ended the trading session at $86.10 on Thursday.
InvestingPro Insights
Following Canaccord Genuity’s arrangement with Spectrum Brands Holdings Inc. (NYSE:SPB), a deeper dive into the company’s financials with InvestingPro reveals mixed metrics that investors may find informative. Despite facing challenges in its Home & Personal Care and Pet Specialty segments, the company’s strategic financial management is worth noting.
InvestingPro data shows that Spectrum Brands is trading near its 52-week high priced at $79.97, just shy of the 97.85% high mark. This is in line with the analyst’s observation that the market recognized the value of the company after the share buyback. The recent price performance reflects investor optimism, as indicated by a significant one-week total price return of 9.19% and a stable one-year total price return of 37.39%.
Although the company’s revenue has decreased over the past twelve months, with a -6.18% change, EBITDA growth over the same period has been positive at 14.6%, suggesting that the company’s cost management and operational efficiency are have a positive effect. Furthermore, Spectrum Brands’ liquid assets exceed short-term obligations, providing some financial stability in the face of revenue constraints. An InvestingPro Tip notes that analysts are predicting that the company will turn a profit this year, which, if realized, could further boost investor confidence.
For investors looking for a more comprehensive analysis, there are additional InvestingPro Tips available for Spectrum Brands, including insights into valuation multiples and profitability. To access these tips and more detailed financial data, consider an InvestingPro subscription. Use a coupon code PRONEWS24 to get an additional 10% off annual or bi-annual Pro and Pro+ subscriptions, and unlock the full potential of financial analytics to inform your investment decisions.
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