Energizer (ENR)

Battery and lighting company Energizer (NYSE:ENR) announced better-than-expected revenue in Q2 CY2025, with sales up 3.4% year on year to $725.3 million. Its GAAP profit of $2.13 per share increased from -$0.61 in the same quarter last year.

Company Overview

Masterminds behind the viral Energizer Bunny mascot, Energizer (NYSE:ENR) is one of the world's largest manufacturers of batteries.

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.

Competitors in the battery and lighting industry include AmazonBasics (owned by Amazon, NASDAQ:AMZN), Duracell (owned by Proctor & Gamble, NYSE:PG), Panasonic (TSE:6752), and Sony (NYSE:SONY).

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $2.93 billion in revenue over the past 12 months, Energizer carries some recognizable 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.

As you can see below, Energizer’s revenue declined by 1.1% per year over the last three years, a tough starting point for our analysis.

This quarter, Energizer reported modest year-on-year revenue growth of 3.4% but beat Wall Street’s estimates by 3.1%.

Looking ahead, sell-side analysts expect revenue to grow 1% over the next 12 months. Although this projection suggests its newer products will spur better top-line performance, it is still below the sector average.

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.

The demand for Energizer’s products has barely risen over the last eight quarters. On average, the company’s organic sales have been flat.

In the latest quarter, Energizer’s year on year organic sales were flat. This performance was more or less in line with its historical levels.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Energizer has great unit economics for a consumer staples company, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 42.2% gross margin over the last two years. That means for every $100 in revenue, only $57.84 went towards paying for raw materials, production of goods, transportation, and distribution.

In Q2, Energizer produced a 55.1% gross profit margin, up 13.6 percentage points year on year and easily exceeding analysts’ estimates. Energizer’s full-year margin has also been trending up over the past 12 months, increasing by 3.6 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Energizer has managed its cost base well over the last two years. It demonstrated solid profitability for a consumer staples business, producing an average operating margin of 13.2%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Energizer’s operating margin rose by 1.4 percentage points over the last year, showing its efficiency has improved.

In Q2, Energizer generated an operating margin profit margin of 22.6%, up 10.1 percentage points year on year. The increase was driven by stronger leverage on its cost of sales (not higher efficiency with its operating expenses), as indicated by its larger rise in gross margin.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q2, Energizer reported EPS at $2.13, up from negative $0.61 in the same quarter last year. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Energizer has shown impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 8.2% over the last two years, better than the broader consumer staples sector.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Energizer historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.6%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Energizer’s $3.47 billion of debt exceeds the $171.1 million of cash on its balance sheet. Furthermore, its 5× net-debt-to-EBITDA ratio (based on its EBITDA of $639.7 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Energizer could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Energizer can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We were impressed by how significantly Energizer blew past analysts’ gross margin expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 10.7% to $24.49 immediately following the results.

Updated: November 9, 2025 at 9:53 PM EST

Before investing in or passing on Energizer, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Energizer’s business quality ultimately falls short of our standards. To kick things off, its revenue has declined over the last three years. And while its expanding operating margin shows the business has become more efficient, the downside is its projected EPS for the next year is lacking. On top of that, its cash profitability fell over the last year.

Energizer’s P/E ratio based on the next 12 months is 6.8x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $30.43 on the company (compared to the current share price of $23.84).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.