Energizer Long
Energizer is a company that we have all used their products before in the past whether knowing about them or not. If they sound familiar it’s because they are one of the world's largest battery manufacturers based in the USA. Usually, when I type my reports, I talk about the rising operation and consumer costs however, I feel like this is starting to be a topic in the past. Although inflation still isn’t as low as it used to be, it has somewhat stabilized and companies have had more than enough time to find a
solution to this. Additionally, consumers are also starting to get used to new pricings and adjusting their budgets. The expected EPS for this quarter further backs up my point as it is increasing compared to last quarter. With that aside, another factor that we have to look at is their customer demand. Based on my own experience, I’ve never had any batteries laying around or never bought batteries unless I needed them for a product. I assume this to be the same for most of their customers not considering their contracts with other companies. I consider this to be a good thing specially in today’s environment where people are cutting back on their spendings. From the beginning, anybody who bought their product considered it as a necessity and had no other choice but to buy one, so even in today’s economic environment, things won’t look much different and the demand will stay the same. At the same time, batteries already are very cheap to begin with, meaning that even customers who are heavily try to cut back on their spending won’t feel much of a price difference when it comes to buying batteries. I believe their forecast to also look very good for the next quarter. As Christmas time is coming up, everyone needs batteries for their decorations or the toys they received as gifts so the demand will be much higher compared to other quarters. However, one thing that I’m having doubts about is their factory in china. With the lockdowns happening I don’t know if they will be affected by it or not. Their EPS is suggesting the opposite but you can never tell how much impact it had on their revenue until you read the report. Something else giving me confidence is their good history of beating EPS estimates. The last time they missed it was back in 2020 and it is a very good sign and has usually translated to an upward movement when companies beat EPS estimates the past couple of weeks.
Taking a look at my past mistakes that I was wrong on in the reports were underestimating the companies. There have been many times where I had predicted a company to do poorly due to certain circumstances that ended up being wrong due to factors that I hadn’t taken a look at. When looking at the EPS estimates, they have been lowered by around 1%. This isn’t really an indicator of anything as these estimates change all the time and the 1% change is normal. Additionally, currently speaking, their stock is the highest it has been over the past 200 days which in my opinion is a good sign. Usually if investors are predicting something or waiting for an event to happen that might affect the company the stock falls along with it as well, even if there is a slight chance of the company doing poorly. Looking at Energizer’s price point right now, it is obvious that the investors are having good predictions for the future of the company. The percentage movement of the company the day before their report comes out is also a good indicator on what people are expecting. These movements are usually based on the report their competitors came out with. Currently Energizer is up about 2% which again shows that investors are anticipating good results for tomorrow. Of course no one can guess the futures and none of these indicators are a 100% proof of how Energizer will do however, taking all the evidence available, I believe that the chances of Energizer coming out with a good report tomorrow is more than the chances of the report not meeting expectations.
What other analysts say:
The consensus EPS estimate for the quarter has been revised 1.33% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.
From a revenue perspective, Energizer Holdings is performing fairly well. Sales in the first nine months of its 2022 fiscal year came in at $2.26 billion. That's roughly flat compared to the same time one year earlier. For the third quarter alone, sales have performed fairly well, coming in at $728 million. That's 0.9% above the $721.8 million the firm generated the same time one year earlier
However, the business was impacted to the tune of $10.2 million because of Russia and to the tune of $32.9 million because of foreign currency fluctuations. Fortunately, some of this was also offset by a $9.3 million increase in sales associated with its operations in Argentina. The company keeps these figures separate because of a high inflation environment in that country. Similar changes affected sales for the latest quarter alone, with organic revenue growing a robust 3.8%, driven by pricing in battery and auto care products pushing sales up by 10%. The company also benefited in this quarter to the tune of 1% from new distribution across both segments. However, this all was offset by a 7.5% decline caused by decreased volume.
We should also pay attention to other profitability metrics. So far in 2022, operating cash flow has been negative to the tune of $106.2 million. That's a significant swing compared to the $17.5 million reported one year later. If we adjust for changes in working capital, however, the metric would have fallen more modestly from $298.9 million to $264 million. And over that same window of time, we would have seen EBITDA drop from $484.4 million to $421.9 million. Similarly mixed results can be seen when looking at the latest quarter alone. Operating cash flow fell from $5.1 million to $2.5 million. On an adjusted basis, however, it rose from $82.1 million to $99.2 million, while EBITDA increased from $144.4 million to $145.5 million.
For the 2022 fiscal year in its entirety, management is forecasting net income of between $184 million and $207 million. On an adjusted basis, this should be higher at between $215 million and $238 million. The company also provided guidance for EBITDA to come in at between $560 million and $590 million. No guidance was given when it came to operating cash flow. But if we assume that it will increase at the same rate that EBITDA, at the midpoint, should, then we should anticipate a reading of $323.5 million.
P/E Ratio: 10.05
Market cap: 2,128,379,114
Time: Tomorrow before market open
Estimate: +5%