Household products company Spectrum Brands (NYSE:SPB) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 6% year on year to $779.4 million. It made a non-GAAP profit of $1.10 per share, improving from its profit of $0.75 per share in the same quarter last year.
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Spectrum Brands (SPB) Q2 CY2024 Highlights:
- Revenue: $779.4 million vs analyst estimates of $750.7 million (3.8% beat)
- EPS (non-GAAP): $1.10 vs analyst expectations of $1.22 (9.8% miss)
- Gross Margin (GAAP): 38.9%, up from 35.9% in the same quarter last year
- EBITDA Margin: 13.6%, in line with the same quarter last year
- Free Cash Flow of $72.6 million is up from -$9 million in the previous quarter
- Organic Revenue rose 7.1% year on year (-9.7% in the same quarter last year)
- Market Capitalization: $2.29 billion
“We are pleased to report a strong third quarter of fiscal 2024, building off the operating momentum we drove in the first half of the year. Each business delivered reported and organic net sales growth, and year-to-date our net sales growth is now positive. This quarter, our operations produced a gross margin of 38.9%, a 310 basis point improvement over last year. Our net income increased $191.3 million and our Adjusted EBITDA, excluding investment income, was $93.6 million despite almost $23 million of incremental brand and innovation-focused investments we made in the quarter. Net income margins increased to 2.5% and Adjusted EBITDA margins, excluding investment income, were 12.0%. Given our performance and expectations for the remainder of the year, we are updating our full year Earnings Framework. While we continue to expect net sales to be relatively flat, Adjusted EBITDA is now expected to grow approximately 20%,“ said David Maura, Chairman and Chief Executive Officer of Spectrum Brands.
A leader in multiple consumer product categories, Spectrum Brands (NYSE:SPB) is a diversified company with a portfolio of trusted brands spanning home appliances, garden care, personal care, and pet care.
Household Products
Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.
Sales Growth
Spectrum Brands carries some recognizable brands and products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, Spectrum Brands can still achieve high growth rates because its revenue base is not yet monstrous.
As you can see below, the company's revenue has declined over the last three years, dropping 4.9% annually. This is among the worst in the consumer staples industry, where demand is typically stable.
This quarter, Spectrum Brands reported solid year-on-year revenue growth of 6%, and its $779.4 million in revenue outperformed Wall Street's estimates by 3.8%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
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Organic Revenue Growth
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business's performance excluding the impacts of foreign currency fluctuations and one-time events such as mergers, acquisitions, and divestitures.
Spectrum Brands's demand has been falling over the last eight quarters, and on average, its organic sales have declined by 4.8% year on year.
In the latest quarter, Spectrum Brands's organic sales rose 7.1% year on year. This growth was a well-appreciated turnaround from the 9.7% year-on-year decline it posted 12 months ago, showing the business is regaining momentum.
Key Takeaways from Spectrum Brands's Q2 Results
We were impressed by how significantly Spectrum Brands blew past analysts' organic revenue growth expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, its EPS missed analysts' expectations. Overall, this quarter was mixed but with some key positives. The stock remained flat at $81.78 immediately after reporting.
So should you invest in Spectrum Brands right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.