Prestige Brands Holdings Inc. PBH is benefitting from impressive sales history, brand building initiatives, strategic acquisitions and debt- reduction efforts. Notably, its value-accretive acquisitions of brands like Fleet, BC and Goody's have been driving the company’s performance.
Shares of this company have outpaced both the Zacks Consumer Products-Miscellaneous Discretionary industry and the broader sector in the past three months. Evidently, this Zacks Rank #3 (Hold) stock has rallied 14.1%, while the industry rose 8.6% and the Zacks Consumer Discretionary sector gained 9.1%.
Let’s Delve Deeper
Prestige brands’ top line has been increasing year over year for quite some time now. In the fourth quarter, sales grew 6.4% year over year, owing to strong consumption trend in the company’s core brands. Its largest acquisition, Fleet, generated sales of $175.4 million in 2018 and was also a major driver in the fourth quarter.
Both these factors benefited the company’s segments as all, except Household Cleaning, witnessed sales growth. These upsides have made management confident of the company’s sales growth. It now expects sales to be in the range of $1,046-$1,056 million in fiscal 2019.
The company is actively pursuing strategic mergers and acquisitions to boost growth. It has completed five significant mergers since 2012, out of which BC and Goody's contributed 25% to sales, till date. Also, the company acquired Fleet in January 2017.
The addition of Fleet will strengthen its portfolio and lead the company toward long-term growth. With such efforts, the company remains poised to meet its goal of having “invest for growth” brands form 85% of its portfolio.
Additionally, it remains committed to reduce its debt through strong cash generation. The company’s brand building activities and sales-growth have largely been driving its steady cash flows. The company expects to sustain such trends in fiscal 2019 as well, wherein management expects to achieve roughly 4.7 times net debt-to-EBITDA..
However, stiff competition and softness in Household Cleaning segment might weigh upon the company’s results. Also, increasing trend in cost of sales remains a concern. Persistence of this trend may hurt the gross margin.
Bottom line
Nonetheless, we believe that the aforementioned headwinds will be efficiently overcome by Prestige Brands’ strategic initiatives. Estimates have remained largely stable ahead of first-quarter fiscal 2019 earnings release. The Zacks Consensus Estimate for the first quarter and fiscal 2019 are currently pegged at 66 cents and $2.99, respectively.
Looking for Better Stocks? Check These
Unicharm UNICY, a Zacks Rank #2 (Buy) stock, has long-term earnings per share growth rate of 10%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sodastream SODA, a Zacks Rank #2 stock, has long-term earnings per share growth rate of 7.5%.
Nutrisystem NTRI, a Zacks Rank #2 stock, has long-term earnings per share growth rate of 17.5%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 – 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment