Spectrum Brands (SPB)

Household products company Spectrum Brands (NYSE:SPB) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 10.2% year on year to $699.6 million. Its non-GAAP profit of $1.24 per share was in line with analysts’ consensus estimates.

Company Overview

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 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 include General Electric (NYSE:GE) in home appliances, Central Garden & Pet (NASDAQ:CENT) in pet care, Scotts Miracle-Gro (NYSE:SMG) in lawn and garden care, and Procter & Gamble (NYSE:PG) in personal care.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $2.85 billion in revenue over the past 12 months, Spectrum Brands 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, Spectrum Brands’s revenue declined by 3.2% per year over the last three years, a tough starting point for our analysis.

This quarter, Spectrum Brands missed Wall Street’s estimates and reported a rather uninspiring 10.2% year-on-year revenue decline, generating $699.6 million of revenue.

Looking ahead, sell-side analysts expect revenue to decline by 1.5% over the next 12 months. it’s tough to feel optimistic about a company facing demand difficulties.

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.

Spectrum Brands’s demand has been falling over the last eight quarters, and on average, its organic sales have declined by 1.4% year on year.

In the latest quarter, Spectrum Brands’s organic sales fell by 11.1% year on year. This decrease represents a further deceleration from its historical levels. We hope the business can get back on track.

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.

Spectrum Brands has good unit economics for a consumer staples company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 36.8% gross margin over the last two years. Said differently, Spectrum Brands paid its suppliers $63.25 for every $100 in revenue.

Spectrum Brands produced a 37.8% gross profit margin in Q2, down 1.1 percentage points year on year but still exceeding analysts’ estimates by 1.1%. Zooming out, however, Spectrum Brands’s full-year margin has been trending up over the past 12 months, increasing by 1.1 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as raw materials).

Spectrum Brands was profitable over the last two years but held back by its large cost base. Its average operating margin of 4.9% was weak for a consumer staples business. This result is surprising given its high gross margin as a starting point.

Looking at the trend in its profitability, Spectrum Brands’s operating margin decreased by 1.5 percentage points over the last year. Spectrum Brands’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Spectrum Brands generated an operating margin profit margin of 4.5%, down 1.6 percentage points year on year. Since Spectrum Brands’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

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, Spectrum Brands reported adjusted EPS at $1.24, up from $1.10 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Spectrum Brands’s full-year EPS of $3.91 to grow 5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

While Spectrum Brands posted positive free cash flow this quarter, the broader story hasn’t been so clean. Over the last two years, Spectrum Brands’s demanding reinvestments and muted organic growth have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 7%, meaning it lit $6.97 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Spectrum Brands’s margin expanded by 18.9 percentage points over the last year. Despite its improvement and recent free cash flow generation, we’d like to see more quarters of positive cash flow before recommending the stock.

Spectrum Brands’s free cash flow clocked in at $71.8 million in Q2, equivalent to a 10.3% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

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).

Spectrum Brands historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 0.8%, lower than the typical cost of capital (how much it costs to raise money) for consumer staples companies.

Spectrum Brands reported $122 million of cash and $759.9 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $294.6 million of EBITDA over the last 12 months, we view Spectrum Brands’s 2.2× net-debt-to-EBITDA ratio as safe. We also see its $6.4 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Spectrum Brands narrowly top analysts’ gross margin expectations this quarter. On the other hand, its revenue missed and its organic revenue fell short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock traded up 10.1% to $58.30 immediately following the results.

Updated: November 8, 2025 at 9:52 PM EST

Before making an investment decision, investors should account for Spectrum Brands’s business fundamentals and valuation in addition to what happened in the latest quarter.

Spectrum Brands doesn’t pass our quality test. First off, its revenue has declined over the last three years. And while its EPS growth over the last three years has been fantastic, the downside is its cash burn raises the question of whether it can sustainably maintain growth. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Spectrum Brands’s P/E ratio based on the next 12 months is 13.5x. At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $78 on the company (compared to the current share price of $54.18).

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.