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Category: Stock Market and Edgewell Personal Care
Date: 13 November 2019 Stock Price: $33.07 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Edgewell a consumer products company that owns brands such as Shick and Playtex.
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About Edgewell
Edgewell is a leading pure-play consumer products company with an attractive, diversified portfolio of established brand names such as Schick® and Wilkinson Sword® men's and women's shaving systems and disposable razors; Edge® and Skintimate® shave preparations; Playtex®, Stayfree®, Carefree® and o.b.® feminine care products; Banana Boat®, Hawaiian Tropic®, Bulldog® and Jack Black® sun and skin care products; Playtex® infant feeding and Diaper Genie®; and Wet Ones® moist wipes. The Company has a broad global footprint and operates in more than 50 markets, including the U.S., Canada, Mexico, Germany, Japan, the U.K. and Australia, with approximately 6,000 employees worldwide.
Overview of Edgewell's 4th quarter earnings report
- Net sales: $528 million (down from $537.4 million for the same quarter of the previous year
- Revenue decreased by -1.7% over the last 12 months
- Cost of sales: $298 million (down from $306.6 million for the same quarter of the previous year)
- Cost of sales decreased by -2.8% over the last 12 months
- Net income: $40.7 million (down from $16 million for the same quarter of the previous year)
- Diluted earnings per share: $0.75 (up from $0.36 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 54.3 million (up from 54.2 million for the same quarter of the previous year)
- Cash and cash equivalents: $341.6 million
- Cash and cash equivalents per share: $0.61
- Cash and cash equivalents makes up 1.84% of Edgewell's market capital
- Cash and cash equivalents makes up 9.93% of Edgewell's total assets
- Accounts receivable: $205.6 million
- Accounts receivable makes up 5.97% of Edgewell's total assets
- Inventories: $357.2 million
- Inventories makes up 10.4% of Edgewell's total assets
- Stockholders equity of Edgewell's : $1.322 billion
- Stockholders equity per share: $24.3
- Edgewell is trading at 1.36 times its stockholders equity per share which is outside the expected range of between 2 and 4 that most firms tend to trade at
- Cash generated from operations (for 9 months): $190.6 million
- Cash generated from operations per share (for 9 months): $3.51
Edgewell's management commentary on their 4th quarter earnings report and 2020 guidance
SHELTON, Conn., Nov. 12, 2019 /PRNewswire/ -- Edgewell Personal Care Company (NYSE: EPC) today announced results for its fourth fiscal quarter 2019 and full fiscal year ended September 30, 2019 and provided its financial outlook for fiscal 2020.
"Fiscal 2019 was a transformative year for Edgewell, as we advanced our strategic and financial objectives, reshaped our portfolio, invested in our brands and new growth opportunities, and generated substantial cost savings," said Rod Little, Edgewell's President and Chief Executive Officer. "Our operating and financial results reflect the actions we are taking to innovate, drive sustained growth and simplify the business. Despite the challenging competitive environment, we met the financial targets we set one year ago, and importantly in the second half of the fiscal year, we delivered year-over-year improvement in organic top-line performance across all of our key geographies and segments."
Portfolio Transformation
As previously announced, Edgewell has entered into a definitive agreement under which Edgewell will combine with Harry's Inc. The transaction represents a pivotal step forward in Edgewell's portfolio transformation, combining Harry's best-in-class brand building, design and direct-to-consumer (DTC) expertise with Edgewell's strong product technology in shaving, personal care and sun care, global infrastructure and iconic consumer brands. This combination will enable the new company to win across categories and across channels with greater agility and an enhanced ability to connect with the modern consumer. The companies received a second request from the FTC and are continuing to work cooperatively and constructively to provide the FTC the information it needs in a timely manner so that it may complete its review. The companies continue to expect the transaction to close in the first quarter of calendar 2020.
The Company also previously announced its decision to retain the Feminine Care business, determining that there is currently more opportunity for value creation by retaining the business given improving business trends and an outlook for solid EBITDA and cash generation going forward. The Company announced on October 15, 2019, its decision to sell its Infant and Pet Care business to Le Holding Angelcare Inc. for $122.5 million. The transaction is subject to customary closing conditions and is expected to close by the end of the 2019 calendar year.
Mr. Little commented, "We are taking decisive actions to reshape our company and focus on our core Personal Care brands. This transaction brings more clarity to our portfolio, provides additional funds to pay down debt, and is a good outcome for all Edgewell stakeholders."
"Fiscal 2019 was a transformative year for Edgewell, as we advanced our strategic and financial objectives, reshaped our portfolio, invested in our brands and new growth opportunities, and generated substantial cost savings," said Rod Little, Edgewell's President and Chief Executive Officer. "Our operating and financial results reflect the actions we are taking to innovate, drive sustained growth and simplify the business. Despite the challenging competitive environment, we met the financial targets we set one year ago, and importantly in the second half of the fiscal year, we delivered year-over-year improvement in organic top-line performance across all of our key geographies and segments."
Portfolio Transformation
As previously announced, Edgewell has entered into a definitive agreement under which Edgewell will combine with Harry's Inc. The transaction represents a pivotal step forward in Edgewell's portfolio transformation, combining Harry's best-in-class brand building, design and direct-to-consumer (DTC) expertise with Edgewell's strong product technology in shaving, personal care and sun care, global infrastructure and iconic consumer brands. This combination will enable the new company to win across categories and across channels with greater agility and an enhanced ability to connect with the modern consumer. The companies received a second request from the FTC and are continuing to work cooperatively and constructively to provide the FTC the information it needs in a timely manner so that it may complete its review. The companies continue to expect the transaction to close in the first quarter of calendar 2020.
The Company also previously announced its decision to retain the Feminine Care business, determining that there is currently more opportunity for value creation by retaining the business given improving business trends and an outlook for solid EBITDA and cash generation going forward. The Company announced on October 15, 2019, its decision to sell its Infant and Pet Care business to Le Holding Angelcare Inc. for $122.5 million. The transaction is subject to customary closing conditions and is expected to close by the end of the 2019 calendar year.
Mr. Little commented, "We are taking decisive actions to reshape our company and focus on our core Personal Care brands. This transaction brings more clarity to our portfolio, provides additional funds to pay down debt, and is a good outcome for all Edgewell stakeholders."
Full Fiscal Year 2020 Financial Outlook
The outlook provided for fiscal 2020, reflects the existing Edgewell business only, including the Infant and Pet Care business. It does not include any elements of the Harry's combination or future synergies. Adjustments to this outlook will be provided, as needed, at a future date, post close of these transactions.
The fiscal 2020 outlook for the standalone Edgewell business contemplates stable top-line and stable gross margin performance, compared to fiscal 2019, on-going Project Fuel gross savings and increased commercial investments in the business. Importantly, this Edgewell-only outlook for fiscal 2020 is consistent with the financial assumptions and valuation models developed in support of the combination with Harry's, as announced on May 9, 2019.
Mr. Little added, "With our pending transactions, we are fundamentally changing the Company. And the outlook we are providing today reflects the actions we are taking and progress we are making to address our core businesses and best positions us as we move into the next chapter of the company's evolution, focusing on growth and re-investment in the business to drive sustainable value creation."
The outlook provided for fiscal 2020, reflects the existing Edgewell business only, including the Infant and Pet Care business. It does not include any elements of the Harry's combination or future synergies. Adjustments to this outlook will be provided, as needed, at a future date, post close of these transactions.
The fiscal 2020 outlook for the standalone Edgewell business contemplates stable top-line and stable gross margin performance, compared to fiscal 2019, on-going Project Fuel gross savings and increased commercial investments in the business. Importantly, this Edgewell-only outlook for fiscal 2020 is consistent with the financial assumptions and valuation models developed in support of the combination with Harry's, as announced on May 9, 2019.
Mr. Little added, "With our pending transactions, we are fundamentally changing the Company. And the outlook we are providing today reflects the actions we are taking and progress we are making to address our core businesses and best positions us as we move into the next chapter of the company's evolution, focusing on growth and re-investment in the business to drive sustainable value creation."
- The Company estimates total net sales to be in the range of down 2% to 1% compared to the prior year. Organic net sales growth, which excludes an estimated 100 basis point negative impact from currency, is expected to be in the range of down 1% to flat compared to the prior year.
- The outlook for GAAP EPS is in the range of $2.45 to $2.65 and includes: Project Fuel restructuring charges, IT enablement costs, acquisition and integration costs and Sun Care Monograph costs.
- The outlook for Adjusted EPS is in the range of $3.10 to $3.30.
- The Company is also providing an outlook for Adjusted EBITDA, as we believe EBITDA will be an important metric on a go-forward basis as a combined company with Harry's. Adjusted EBITDA is estimated to be in the range of $370 to $380 million.
- For fiscal 2020, Project Fuel is expected to generate approximately $70 million in incremental gross savings. Project Fuel related restructuring charges are expected to be approximately $36 million. Total Company capital expenditures, including Project Fuel are expected to be approximately 3.0% to 3.5% of net sales.
- The adjusted effective tax rate for fiscal 2020 is estimated to be in the range of 22.5% to 24.5%.
- The Company anticipates that fiscal 2020 free cash flow will be above 125% of GAAP net earnings.
Edgewell (NYSE: EPC) stock price history
The image below shows the stock price history of Edgewell (NYSE: EPC) over the last 5 years. And it's not been a good time for Edgewell. 5 years ago the stock was trading at around $93.40 and it is currently trading at $33.07 a stock. That is a loss of -64.5% suffered by Edgewell stockholders over the last 5 years.
The stock of Edgewell is trading at closer to its 52 week low of $26.36 than it is to its 52 week high of $47.39 which to us is a clear indication that the short term sentiment and momentum of Edgewell's stock is very negative.
The stock of Edgewell is trading at closer to its 52 week low of $26.36 than it is to its 52 week high of $47.39 which to us is a clear indication that the short term sentiment and momentum of Edgewell's stock is very negative.
Recent coverage of Edgewell
The extract below discusses Covetrus' slide from the MidCap index to the small caps index as obtained from TheStreet.com
SHELTON, Conn. and MONTREAL, Oct. 21, 2019 /PRNewswire/ -- Edgewell Personal Care Company (NYSE: EPC) today announced that it has entered into a definitive agreement to sell its Infant and Pet Care business to Le Holding Angelcare Inc. ("Angelcare") for $122.5 million. Under the terms of the agreement, the Angelcare group will acquire from Edgewell Personal Care Brands, LLC the rights and assets of Diaper Genie®, the diaper disposal system, and Litter Genie®, the cat litter disposal system. In addition, Angelcare will have the exclusive rights to the Playtex® brand in the infant and pet spaces including in cups, bottles, and mealtime products in U.S. and Canada under license from Playtex Marketing Corporation, and elsewhere around the world under license from HBI Branded Apparel Enterprises, LLC. "This transaction is the culmination of a thorough strategic review process to maximize the value of the Infant and Pet Care business, and an important milestone in Edgewell's portfolio transformation," said Rod Little, Edgewell's President and Chief Executive Officer.
Read the full article here
SHELTON, Conn. and MONTREAL, Oct. 21, 2019 /PRNewswire/ -- Edgewell Personal Care Company (NYSE: EPC) today announced that it has entered into a definitive agreement to sell its Infant and Pet Care business to Le Holding Angelcare Inc. ("Angelcare") for $122.5 million. Under the terms of the agreement, the Angelcare group will acquire from Edgewell Personal Care Brands, LLC the rights and assets of Diaper Genie®, the diaper disposal system, and Litter Genie®, the cat litter disposal system. In addition, Angelcare will have the exclusive rights to the Playtex® brand in the infant and pet spaces including in cups, bottles, and mealtime products in U.S. and Canada under license from Playtex Marketing Corporation, and elsewhere around the world under license from HBI Branded Apparel Enterprises, LLC. "This transaction is the culmination of a thorough strategic review process to maximize the value of the Infant and Pet Care business, and an important milestone in Edgewell's portfolio transformation," said Rod Little, Edgewell's President and Chief Executive Officer.
Read the full article here
Edgewell (NYSE: EPC) latest stock valuation
So what is Edgewell (NYSE: EPIC) stock worth based on the release of their latest earnings report and their outlook provided? Based on the earnings reported and the outlook provided our valuation model provides a target (full value) price for Edgewell at $43.80 a stock. We therefore believe that the stock is undervalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $43.80. A good entry point into Edgewell would therefore be at $39.40 or below. Since the stock is trading well below this price already we rate Edgewell's stock as a buy.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $43.80. A good entry point into Edgewell would therefore be at $39.40 or below. Since the stock is trading well below this price already we rate Edgewell's stock as a buy.
Next earnings release of Edgewell
It is expected that Edgewell's 1st quarter 2020 earnings report will be released in mid February 2020