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Category: Spectrum Brands (SPB)
Date: 16 November 2020 Stock price of Spectrum: $65.57 We take a look at the 4th quarter 2020 earnings report of Spectrum Brands (SPB) a global consumer products company offering a broad portfolio of leading brands focused on driving innovation and providing exceptional customer service. For the quarter the group reported net sales of $1.17 billion and net income of $45.4 million.
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David Maura, Chairman and Chief Executive Officer of Spectrum Brands - We believe we are better positioned today than we have ever been to drive demand as a home essentials company with consumers needing our brands and products more than ever. Additionally, with the supply chain disruptions from COVID-19 earlier in 2020 largely behind us, momentum in the business remains strong, and with continued strong demand in October, fiscal 2021 is off to a great start "
More About Spectrum Brands (SPB)
Spectrum Brands Holdings, a member of the Russell 1000 Index, is a global consumer products company offering a broad portfolio of leading brands focused on driving innovation and providing exceptional customer service. The Company is a leading supplier of residential locksets, residential builders’ hardware, plumbing, shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden, home pest control products, and personal insect repellents. Helping to meet the needs of consumers worldwide, our Company offers a wide portfolio of market-leading, well-known and widely trusted brands including Kwikset®, Weiser®, Baldwin®, National Hardware®, Pfister®, Remington®, George Foreman®, Russell Hobbs®, Black+Decker®, Tetra®, Marineland®, GloFish®, Nature’s Miracle®, Dingo®, 8-in-1®, FURminator®, IAMS® and Eukanuba® (Europe only), DreamBone®, SmartBones®, Digest-eeze™, Healthy-Hide®, Littermaid®, Spectracide®, Cutter®, Repel®, Hot Shot®, Black Flag® and Liquid Fence®. Based in Middleton, Wisconsin, Spectrum Brands generated fiscal 2019 net sales of approximately $3.8 billion
Overview of Spectrum Brands 4th quarter 2020 earnings
- Fourth Quarter Net Sales Increased 17.9% and Organic Net Sales Increased 17.1% Reflecting Strong Growth Across All Business Units
- Fourth Quarter Operating Income and Adjusted EBITDA Increased, Driven by Strong Volumes and Gross Margins Improvement of 240 Basis Points
- Full Year Cash Flow From Operations of $290 Million; Adjusted Free Cash Flow of $254 Million Raising Total Savings Gross Target from Global Productivity Improvement Program from $100 Million to $150 Million
- Strong Balance Sheet with Over $1.1 Billion of Total Liquidity
- Full Year Operating Income of $243 Million and Full Year Adjusted EBITDA of $580 Million
- The Company Expects to Deliver 3% to 5% Net Sales Growth and Mid Single-Digit Adjusted EBITDA Growth for Fiscal 2021
Spectrum Brands management commentary on their 4th quarter 2020 earnings
MIDDLETON, Wis.--(BUSINESS WIRE)--Nov. 13, 2020-- Spectrum Brands Holdings, Inc. (NYSE: SPB; “Spectrum Brands” or the “Company”), a leading global branded consumer products and home essentials company focused on driving innovation and providing exceptional customer service, today reported results from continuing operations for the fourth quarter and full year of fiscal 2020 ended September 30, 2020.
“Our Q4 and full year financial results reflect a better, faster and stronger Spectrum Brands, with net sales, operating income and adjusted EBITDA growth. During the quarter, our net sales accelerated as we grew 17.9%, with strong growth across all business units. These top line results reflect elevated demand levels, with strong POS and improved output. This is evidence of our quick recovery from COVID-19 related supply disruptions earlier in the year. Additionally, our incremental marketing and advertising investments are paying dividends by driving stronger organic top line growth. Operating Income and Adjusted EBITDA growth was driven by strong volumes and improved gross margins. Adjusted EBITDA in Q4 2020 includes a change to our annual incentive compensation program converting to cash payment from a mix of equity and cash in order to better align with industry best practices and our peer group. This change negatively impacts comparability, with $17 million in incremental corporate expense in the quarter. If not for the change, we would have delivered $190 million in adjusted EBITDA this quarter and $597 million in the full year,” said David Maura, Chairman and Chief Executive Officer of Spectrum Brands.
"We believe we are better positioned today than we have ever been to drive demand as a home essentials company with consumers needing our brands and products more than ever. Additionally, with the supply chain disruptions from COVID-19 earlier in 2020 largely behind us, momentum in the business remains strong, and with continued strong demand in October, fiscal 2021 is off to a great start,” said Mr. Maura
“Our Q4 and full year financial results reflect a better, faster and stronger Spectrum Brands, with net sales, operating income and adjusted EBITDA growth. During the quarter, our net sales accelerated as we grew 17.9%, with strong growth across all business units. These top line results reflect elevated demand levels, with strong POS and improved output. This is evidence of our quick recovery from COVID-19 related supply disruptions earlier in the year. Additionally, our incremental marketing and advertising investments are paying dividends by driving stronger organic top line growth. Operating Income and Adjusted EBITDA growth was driven by strong volumes and improved gross margins. Adjusted EBITDA in Q4 2020 includes a change to our annual incentive compensation program converting to cash payment from a mix of equity and cash in order to better align with industry best practices and our peer group. This change negatively impacts comparability, with $17 million in incremental corporate expense in the quarter. If not for the change, we would have delivered $190 million in adjusted EBITDA this quarter and $597 million in the full year,” said David Maura, Chairman and Chief Executive Officer of Spectrum Brands.
"We believe we are better positioned today than we have ever been to drive demand as a home essentials company with consumers needing our brands and products more than ever. Additionally, with the supply chain disruptions from COVID-19 earlier in 2020 largely behind us, momentum in the business remains strong, and with continued strong demand in October, fiscal 2021 is off to a great start,” said Mr. Maura
Liquidity and Debt
As of the end of the fiscal year, the Company had a cash balance of $531.6 million and approximately $579 million available on its $600 million Cash Flow Revolver. The Company had approximately $2,512.8 million of debt outstanding, consisting of approximately $2,349.1 million of senior unsecured notes and approximately $163.7 million of finance leases and other obligations. Net leverage improved to 3.4 times at the end of the fiscal fourth quarter from 3.95 times at the end of the previous quarter.
Fiscal 2021 Outlook
Spectrum Brands expects three to five percent reported net sales growth, with foreign exchange expected to have a slightly positive impact based upon current rates. Fiscal 2021 adjusted EBITDA is expected to increase mid single-digits. Adjusted free cash flow is expected to be between $250 million and $270 million, with strategic investments in inventory levels and other working capital needs for the upcoming year
As of the end of the fiscal year, the Company had a cash balance of $531.6 million and approximately $579 million available on its $600 million Cash Flow Revolver. The Company had approximately $2,512.8 million of debt outstanding, consisting of approximately $2,349.1 million of senior unsecured notes and approximately $163.7 million of finance leases and other obligations. Net leverage improved to 3.4 times at the end of the fiscal fourth quarter from 3.95 times at the end of the previous quarter.
Fiscal 2021 Outlook
Spectrum Brands expects three to five percent reported net sales growth, with foreign exchange expected to have a slightly positive impact based upon current rates. Fiscal 2021 adjusted EBITDA is expected to increase mid single-digits. Adjusted free cash flow is expected to be between $250 million and $270 million, with strategic investments in inventory levels and other working capital needs for the upcoming year
Stock price history of Spectrum Brands (SPB) over the last 5 years
The image below obtained from Google shows Spectrum Brands stock price for the last 5 years. And its not been a good time for Spectrum Brands stockholders. 5 years ago Spectrum Brands was trading at around $87 a stock and its currently trading at $65.57. That's a loss of -32.6% provided to Spectrum Brands stockholders over the last 5 years.
The stock of Spectrum Brands is trading a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term momentum and sentiment towards Spectrum Brands stock is positive right now
The stock of Spectrum Brands is trading a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term momentum and sentiment towards Spectrum Brands stock is positive right now
Latest stock valuation of Spectrum Brands
So based on Spectrum Brands latest earnings report what do we value Spectrum Brands stock at? Based on their earnings reported our valuation model provides a target price (full value price) for Spectrum Brands at $47.30 per stock.
We therefore believe that the stock of Spectrum Brands is slightly overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $47.30. A good entry price into Spectrum Brands would therefore be at $42.60 or below.
We expect the stock of Spectrum Brands to pull back in coming weeks and months to levels closer to our target price (full value price) in coming weeks and months. Since the stock of Spectrum Brands is trading at well above our suggested entry point we rate the stock of Spectrum Brands as a sell
We therefore believe that the stock of Spectrum Brands is slightly overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $47.30. A good entry price into Spectrum Brands would therefore be at $42.60 or below.
We expect the stock of Spectrum Brands to pull back in coming weeks and months to levels closer to our target price (full value price) in coming weeks and months. Since the stock of Spectrum Brands is trading at well above our suggested entry point we rate the stock of Spectrum Brands as a sell
Next earnings release of Spectrum Brands
It is expected that Spectrum Brands will release their 1st quarter 2021 earnings report in early February 2021
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