UPDATE: Wells Fargo Downgrades Energizer

In a report published Tuesday, Wells Fargo analyst Zachary Fadem downgraded

to Market Perform from Outperform, raising its price target from $109.00 to $112.00. According to the report, after a 19 percent run over the last 3 months of 2013 (vs. HPC group + 8 percent), the analyst believe shares appropriately reflect both the upside potential for improved capital allocation as well as the challenged fundamentals across the portfolio. “Consensus FY2014 EPS of $7.40 is toward the high-end of ENR's $7.25-7.50 range, and likely assumes either higher JNJ accretion than the “modest” levels mgmt projects, or incremental cost savings projects, following ENR's over-delivery of targets thus far,” the report said. “While we see opportunity for FY2014 EPS upside potential versus mgmt's outlook, we think the market is already discounting enough of this potential upside to limit share price outperformance; further, the opportunity for ENR to drive a more efficient capital structure, while a positive, seems somewhat limited by the fact that ENR's margins are now quite competitive versus peers with arguably more favorable business mix. From here, we see better risk/reward elsewhere in HPC.” When coverage was launched on ENR in October, the thesis was based on a view that the market was not adequately valuing ENR's potential EPS upside from the JNJ deal and incremental cost savings, the report said. Now, with shares up 19% over the 3 months ended 12/31 the risk/reward tradeoff is seen as more balanced. ENR closed Monday at $103.96 with shares trading down at 1.67 percent.