ENR Q1 Earnings Beat Estimates, FY25 Organic Sales Guidance Raised

Energizer Holdings, Inc. ENR reported impressive first-quarter fiscal 2025 results, wherein both net sales and earnings surpassed the Zacks Consensus Estimate. Also, both top and bottom lines increased year over year.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The company’s fiscal first quarter was impacted by the successful execution of its strategies. Also, strategic investments in innovation, distribution and digital commerce remain a priority to sustain long-term growth. This strong performance reinforces confidence in achieving financial targets for the year and delivering consistent shareholder value. The company raised its organic net sales outlook for fiscal 2025.Energizer Holdings, Inc. Price, Consensus and EPS Surprise Energizer Holdings, Inc. price-consensus-eps-surprise-chart | Energizer Holdings, Inc. QuoteMore on ENR’s Q1 ResultsEnergizer’s adjusted earnings of 67 cents per share beat the Zacks Consensus Estimate of 64 cents. Also, the bottom line increased 13.6% from the year-ago quarter’s reported figure.The company reported net sales of $731.7 million, which surpassed the Zacks Consensus Estimate of $728 million and increased 2.1% from the year-ago quarter’s reported number. Organic net sales increased 3.8% year over year. The metric surpassed our anticipated rate of 2.7% increase.New and expanded distribution led to a volume increase of approximately 3.8% in the Battery & Lights segment. Hurricanes contributed approximately $10 million in incremental volume during the quarter, accounting for roughly 1.4% in organic growth. Additionally, volume growth in the Auto Care segment, driven by distribution gains, international market expansion and the growth of the digital economy, resulted in a 0.5% increase in organic growth. However, this was partially offset by an earlier shift in holiday orders.The increased volumes were partially offset by planned strategic pricing and promotional investments, which had a negative impact of 1.9%.Energizer's Q1 Sales Insights by SegmentsNet sales of Energizer's Batteries & Lights segment increased 2.4% year over year to $632.4 million. The figure beat our estimate of 1.6% increase. We note that segmental profit decreased 9.9% to $119.3 million.Meanwhile, net sales in the Auto Care segment increased 0.5% to $99.3 million from the year-ago period. Segmental profit increased sharply 197.1% to $20.5 million.ENR’s Margin & Cost DetailsIn the fiscal first quarter, Energizer’s adjusted gross margin expanded 50 basis points to 40%. This improvement in adjusted gross margin was primarily driven by Project Momentum, which generated approximately $16 million in savings during the quarter, along with a slight year-over-year increase in product cost inputs. However, this benefit was partially offset by the planned strategic pricing and promotional investments mentioned earlier, as well as unfavorable currency impacts. We expected an adjusted gross margin expansion of 80 basis points year over year.Adjusted SG&A expenses increased 11.9% year over year to $119.2 million. This rise was due to higher depreciation expenses related to digital transformation initiatives and increased legal fees. This increase was partially offset by approximately $3 million in savings from Project Momentum, along with lower factoring and environmental expenses.Adjusted SG&A costs, as a rate of net sales, was 16.3% compared with 16.4% recorded in the prior-year quarter. We expected adjusted SG&A expenses, as a percentage of net sales, to be 16.8% in the fiscal first quarter. Advertising and promotion expenses represented 7.3% of sales, an increase of 70 basis points year over year. This increase was primarily caused by higher investments in brand and business support to strengthen performance during the key holiday season.Adjusted EBITDA was $140.7 million, up 5.9% year over year, whereas the adjusted EBITDA margin increased 70 basis points to 19.2%.Energizer’s Financial Health SnapshotAs of Dec. 31, 2024, Energizer’s cash and cash equivalents were $195.9 million, with long-term debt of $3.12 billion and shareholders' equity of $140.6 million. As of the fiscal first quarter, ENR paid down an additional $25 million of debt. At the end of the quarter, the company’s net debt to adjusted EBITDA was 4.7x times. The operating cash flow as of the fiscal first quarter was $77 million and free cash flow was $42.4 million.ENR Stock Past Three-Month PerformanceImage Source: Zacks Investment ResearchENR’s Q2 OutlookIn the fiscal second quarter, the company expects organic growth between 2% and 3%, primarily driven by distribution gains, new product launches and international expansion within the Auto Care segment. Reported net sales are predicted in the range of flat to a 1% increase, as the strong U.S. dollar continues to pose a challenge.Adjusted gross margin is forecasted to remain steady year over year at 40.5%, with savings from Project Momentum offset by pricing and promotional strategies, along with foreign currency headwinds. Adjusted earnings per share are expected to be between 60 cents and 70 cents compared with 72 cents in the prior year. This decline was primarily due to increased investments in digital transformation and growth initiatives.What to Expect From Energizer in FY25?For fiscal 2025, reported net sales are expected to increase 1% to 2%, while the outlook for organic net sales has been raised in the range of 2-3% from the prior growth estimation of 1% to 2%. Energizer aims to improve its adjusted gross margin by approximately 50 basis points, bringing the number above 41% for the fiscal year. This margin expansion will be driven by cost savings from the ongoing Project Momentum, which is expected to deliver $60 million in total savings for fiscal 2025 and around $200 million for the entire program. This revenue increase, along with the final implementation phase of Project Momentum initiatives, is expected to drive growth in adjusted EBITDA, anticipated to be between $625 million and $645 million. Adjusted EPS for the year is expected to be between $3.45 and $3.65. Debt reduction remains a priority for Energizer with plans to pay down $150 million to $200 million in fiscal 2025, with a net leverage ratio of around 4.5x times.Management anticipates capital expenditures to be between $80 million and $90 million, caused by investments in IT, operations and plastic-free packaging initiatives. As a result of these incremental investments, free cash flow is expected to be between 8% and 10% of sales.Shares of this Zacks Rank #3 (Hold) company have lost 1.3% in the past three months against the industry’s growth of 0.6%.Some Better-Ranked BetsHere, we have highlighted three better-ranked stocks, namely United Natural Foods, Inc. UNFI, Treehouse Foods, Inc. THS and US Foods Holding Corp. USFD.United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. It presently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for UNFI's current fiscal-year earnings and sales indicates growth of 442.9% and 0.3%, respectively, from the year-ago reported figures. UNFI delivered a trailing four-quarter average earnings surprise of 553.1%.Treehouse Foods is a manufacturer of packaged foods and beverages. It has a Zacks Rank of 2 (Buy) at present. The Zacks Consensus Estimate for Treehouse Foods’ current financial-year earnings and sales indicates decline of 20.7% and 4.3%, respectively, from the year-ago figures. THS delivered a trailing four-quarter average earnings surprise of 20.4%.US Foods is a food-service distributor. The company currently carries a Zacks Rank #2. USFD delivered a negative trailing four-quarter earnings surprise of 0.4%, on average. The Zacks Consensus Estimate for US Foods’ current financial-year earnings and sales indicates growth of 18.6% and 6.4%, respectively, from the year-ago reported figures.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 Energizer Holdings, Inc. (ENR): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report TreeHouse Foods, Inc. (THS): Free Stock Analysis Report US Foods Holding Corp. 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