Spectrum Brands +12% After Q2 Results - Read Why

Zinger Key Points
  • Spectrum Brands beats Q2 earnings estimates with adjusted EPS of $1.62, surpassing street view of 62 cents.
  • Despite 1.5% net sales decline, gross profit jumps 27.5% to $273.5 million, with gross profit margin rising to 38.1%.

Spectrum Brands Holdings, Inc. SPB shares are trading higher on Thursday.

The company reported second-quarter adjusted earnings per share of $1.62, beating the street view of 62 cents

Quarterly sales of $718.50 million beat the street view of $707.52 million.

Net sales declined by 1.5%, influenced by reduced consumer demand in home appliances and aquatics, notably in North America. Additionally, SKU rationalizations had an impact, although there was strong point-of-sale performance in controls, attributed to favorable weather trends.

Gross profit jumped 27.5% to $273.5 million, while gross profit margin jumped 870 basis points to 38.1%. Gross profit and gross profit margin increased from the sale of lower cost inventory, lower inventory-related expenses, favorable mix and cost improvements.

“Our net income increased $124.9 million and our Adjusted EBITDA, excluding investment income, more than doubled to $95.3 million. Net income margins increased to 6.9% and Adjusted EBITDA margins, excluding investment income, nearly doubled to 13.3%,” said David Maura, Chairman and Chief Executive Officer of Spectrum Brands.

Adjusted EBITDA from continuing operations jumped 120.2% to $112.3 million. 

As of the end of the quarter, the company had a cash balance of $746 million plus $500 million of short-term investments.

Spectrum Brands declared a quarterly dividend of $0.42 per share, payable on June 18 to shareholders of record as of May 28.

Outlook: Spectrum Brands now expects FY24 reported net sales to be relatively flat to fiscal 2023 (prior view: decline by low single-digits). 

Fiscal 2024 Adjusted EBITDA, excluding investment income, is expected to increase by low double-digits (prior view: increase by high single-digits).

The company continues to target a long-term net leverage ratio of 2.0 – 2.5 times after full deployment of HHI sale proceeds.

Price Action: SPB shares are trading higher by 12.2% to $94.80 at last check Thursday.

Photo via Shutterstock

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