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Citi Suggests Buying Energizer Holdings Again

Citi Suggests Buying Energizer Holdings Again

Citi has reinstated a Buy rating on Energizer Holdings Inc (NYSE: ENR), with a target price of $5 on the stock.

The market reacted positively over Energizer's first deal; on May 24, the company reported it would make an acquisition of HandStands, a U.S.-focused business for $340 million. The major driver for HandStands revenue is automotive fragrance, which constitutes 80 percent of total sales, while the rest comes from automotive appearance.

Energizer forecasts the deal to boost the EBITDA margins, EPS and free cash flow of the company. This seems to have triggered a bullish outlook on the stock, as the share price has outperformed the market by 5 percent since the announcement of the acquisition.

Related Link: Citi Says Sell Energizer, Resumes With An Underweight Rating

Citi provided an updated model, which was based on allocating the revenues and profits from this deal to Energizer’s Q4 2016 and to the full-year 2017 on a pro-rata basis. Taking into consideration the impact of the deal on financial statements, also slight changes in its previous forecast of North America battery sales, Citi estimates Energizer’s EPS to stand at $2.26, $2.62, $2.86 for 2016, 2017 and 2018 calendar years, respectively.

Given the updated pro-forma statements, Citi stated Energizer’s stock is still trading at a 30 percent discount to its HPC peers. It's currently trading at 18x multiple, compared to the group’s average of 20x.

At time of writing, Energizer was up 2.82 percent at $49.60.

Latest Ratings for ENR

Nov 2020Morgan StanleyMaintainsOverweight
Oct 2020Morgan StanleyMaintainsOverweight
Aug 2020Morgan StanleyMaintainsOverweight

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