Bank Of America Upgrades Energizer, Says Hurdles Remain But Seem More Manageable

Shares of Energizer Holdings Inc ENR have declined by around 40% over the past year and are trading at a significant discount to peers.

Expectations for the battery manufacturing giant’s performance have been “sufficiently reset” and the shares have upside potential from here, according to Bank of America Merrill Lynch.

The Analyst

BofA’s Olivia Tong upgraded Energizer Holdings from Underperform to Buy while raising the price target from $35 to $48.

The Thesis

The previous Underperform rating reflected expectations of prolonged challenges at Energizer Holdings’ Auto Care business and cannibalization in the company’s Battery business being worse than the market was anticipating, Tong said.

While curbing Battery cannibalization and restoring retail relationships in Auto Care will pose challenges for Energizer Holdings, consensus EPS estimates for fiscal 2020 have been revised down 13% year to date, the analyst pointed out.

Given the widespread concerns, Energizer Holdings does not need an oversized beat to drive shares higher from current levels, Tong said. He added, however, that the company’s legacy business was solid, and its acquired assets were stabilizing.

Tracked-channel trends had improved modestly, against a better pricing environment, the analyst wrote. He added that hurricane-related demand could boost these trends.

Price Action

Shares of Energizer Holdings has climbed more than 5% to $42.71 at the time of publishing Monday .

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