UBS Boosts PT on Energizer (ENR) to $127; FY15 Guidance Conservative Ahead of Split

UBS lifts its price target on Energizer Holdings (NYSE: ENR) from $121 up to $127 and maintains a Neutral rating on the stock following FQ414 results.

Analyst Stephen Powers summarized: ENR posted Q4:14 EPS of $1.87 vs UBSe of $1.56 and consensus $1.61—a beat largely due to strong growth in Household Products, solid restructuring-related savings, and a 26.2% effective tax rate vs our estimate of 29.3%. On an organic basis, ENR sales grew +1.5% (vs UBSe +0.4%), led by +4.0% growth in HH Products partly offset by -0.6% growth in Personal Care. Adjusted gross margin was 50.5% (vs UBSe of 47.6%), up +334 bps YOY. Op margin was 16.7% (vs UBSe of 15.0%), up +302 bps as COGS savings were partly offset by higher A&P spend. Overall, ENR delivered a strong Q4, though this may not be poised to continue as implied by FY15 guidance.

On Energizer's guidance: Looking ahead to FY15, ENR intends to increase A&P spend by +100 bps through the first three quarters of the year, offset by incremental cost savings ($45M). However, ENR expects FY15 gross margin and overall organic growth to be only flat YOY (HH Products down -LSD, Personal Care up +LSD), while worsening currency headwinds (a $35-40M YOY impact that does not include a VZ devaluation) implies that all-in EPS may decline in 2015. We believe this organic top-line guidance is slightly conservative (as ENR itself indicated—we are modeling +1.5% in 2015); however, this is offset in our model by an assumed VZ currency devaluation that we believe ENR will ultimately take. This brings us to $7.27 in 2015 EPS (vs $7.23 prior)—down -0.8% YOY.

On the price target hike: ...we have raised our HH Products and Personal Care multiples to 8.0x and 11.7x EV/EBITDA (vs 7.6x and 11.6x prior), accounting for a mark to market and increased odds of a more rational operating environment in batteries now that PG is exiting Duracell. Also contributing to the PT raise is a roll-forward in time—our PT is now based on 2016 estimates (vs 2015 prior).

For an analyst ratings summary and ratings history on Energizer click here. For more ratings news on Energizer click here.

Energizer closed at $125.13 yesterday.

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