This Analyst Is Bullish On Helen Of Troy - Read Why

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  • DA Davidson analyst Linda Bolton Weiser upgraded Helen Of Troy HELE from Neutral to Buy and raised the price target from $115 to $126.
  • The analyst said Helen should benefit from the severity of the flu season.
  • As CDC data showed, this flu season has started out to be one of the severest in recent history, said the analyst.
  • Incidence of flu symptoms reported by medical professionals hit a recent peak of 7.5% in the week ended November 27, 2022 and is still very high at 6.9%.
  • Weiser noted that About 20%-25% of HELE’s sales are related to the cold/flu season, including humidifiers, vaporizers, and Vicks and Braun thermometers.
  • Certain products in the company’s Health & Wellness segment were impacted by changes in EPA labeling requirements in FY22, and segment organic sales were -13%, cited the analyst.
  • But, the analyst added, strong signs of recovery were evident in F2Q23, when segment organic sales were +28% Y/Y, beating the +5% estimate.
  • The channel Pont Of Sales (POS) data show that growth of the health products category, that includes humidifiers and vaporizers, accelerated to +12% Y/Y in the four weeks ended December 11, 2022.
  • Also, the analyst said POS in F3Q23 indicated that Helen could report earnings upside surprise on January 5.
  • On October 5, HELE announced a new 3-year restructuring program (FY24-FY26), which will be led by new COO Noel Geoffroy, a premium global consulting firm, and a dedicated internal core team.
  • It is expected to result in annualized pre-tax operating profit improvements of $75M-$85M, with 25% in FY24, 50% in FY25, and 25% in FY26, the analyst said.
  • The analyst believes Project Pegasus will drive improved margins, cash flow, and operating and organizational efficiency.
  • Price Action: HELE shares are trading higher by 2.16% at $99.35 on the last check Thursday.
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