Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.
1 Underperforming Dividend Stock With a 'Compelling' Valuation
As the world rapidly embraces sustainable energy sources and electric vehicles (EVs) zoom into the mainstream, battery companies sporting cutting-edge technologies, rock-solid logistics, and strategic collaborations are well-positioned to thrive. According to market research firm IMARC Group, the global battery market is expected to reach $276.3 billion by 2032, expanding at a compound annual growth rate (CAGR) of 8.7%.
Discussing batteries inevitably brings to mind the iconic image of the Energizer Bunny – a creative marketing invention of Energizer Holdings, Inc. (ENR). The company is renowned for its innovative strides and dominance in the battery and portable lighting sectors.
With ENR dipping 2.5% in 2024 and trading 17.3% below its 52-week high of $37.32, Morgan Stanley (MS) is ready to predict a rebound for ENR stock, thanks to more robust pricing trends and favorable industry dynamics. The brokerage firm upgraded the stock post-Q2 earnings, noting a “compelling” valuation after recent setbacks.
Let's have a closer look at this dividend stock.
About Energizer Holdings Stock
Spun off into a standalone company in 2015, Missouri-based Energizer Holdings, Inc. (ENR) manufactures and distributes household batteries, specialty batteries, and lighting products worldwide under brands like Energizer, Eveready, and Rayovac. Valued at $2.2 billion by market cap, the battery manufacturer licenses its brands for consumer solutions in solar, automotive, power tools, lighting, and automotive care products.
Shares of Energizer have declined 12.7% over the past 52 weeks, underperforming the broader S&P 500 Index's ($SPX)28.1% returns.
On April 29, Energizer Holdings' board of directors declared a dividend of $0.30 per share on its common stock, payable to its shareholders on June 12. The company’s annualized dividend of $1.20 translates to a 3.99% dividend yield. Plus, with a conservative payout ratio of 39%, Energizer Holdings retains flexibility for growth initiatives and potential dividend increases.
Priced at 9.25 times forward earnings and 0.73 sales, Energizer Holdings trades at a discount to its peers, such as Enersys Inc. (ENS), and its own five-year averages.
Energizer Reports Q2 Earnings Results
Shares of the battery maker dipped following Energizer’s fiscal Q2 earnings results on May 7. Although its revenue of $663.3 million surpassed Wall Street's estimates, it declined 3% annually. Adjusted EPS rose 12.5% year over year to $0.72, beating testimates by 7.5%. Its adjusted gross margin rose 260 basis points to 40.5% for the quarter.
Steady category improvements, coupled with project momentum benefits, fueled Energizer Holdings’ adjusted gross margin growth and strong adjusted EPS. In the first half of the year, it generated $162.9 million in free cash flow, paid dividends of $44 million, and slashed debt by roughly $141 million.
Encouraged by battery advancements, auto care business growth, and overall strategic progress, the company remains optimistic about its trajectory. For Q3, organic revenues are expected to rise 1%, while adjusted EPS is anticipated between $0.62 and $0.68. For fiscal 2024, Energizer Holdings projects organic revenue to be flat to down low-single digits, while adjusted EPS is expected between $3.10 and $3.30.
Analysts tracking Energizer Holdings predict its EPS to grow to $3.21 in fiscal 2024, up 3.9% annually, and then another 5.9% to $3.40 in fiscal 2025.
What Do Analysts Expect for Energizer Holdings Stock?
Shares of Energizer Holdings rose after a brief dip post-Q2 earnings results when Morgan Stanley upgraded ENR stock last Wednesday from “Underweight” to “Equal Weight” while maintaining a price target of $33.
Morgan Stanley upgraded Energizer for two key reasons. First, its stock now offers “compelling” value after a period of underperformance, and second, the firm expects stronger fundamentals in the second half of the year. Specifically, Morgan Stanley analyst Dara Mohsenian sees Energizer capitalizing on stronger pricing, auto category improvements, and more favorable commodity costs.
Overall, ENR has a consensus “Hold” rating. Of the seven analysts covering the stock, one advises a “Strong Buy,” five suggest a “Hold” rating, and the remaining one gives a “Strong Sell.”
The average analyst price target for Energizer Holdings is $32, indicating a potential upside of 3.5%. The Street-high target price of $38 suggests the stock could rally as much as 22.9%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
