Why Spectrum Brands Holdings Inc. Shares Plunged Today

What happened

Shares of Spectrum Brands Holdings Inc. (NYSE: SPB) were falling today after the parent of household-product brands like Rayovac, Remington, and Iams posted a disappointing fourth-quarter earnings report. As of 11:12 a.m. EST, the stock was down 19.3%.

So what

Organic sales increased 0.4% in the period, and overall revenue was unchanged at $787.8 million, but that missed estimates at $801 million. Its home and garden and global pet supplies segments were particularly weak, seeing revenue fall 6.2% and 2.3%, respectively.

A cleaning person holds a bucket of cleaning products.

Image source: Getty Images.

Gross margin in the period fell from 39.3% to 36.8% due to start-up inefficiencies at two facilities, a problem that weighed on the company earlier in the year, as well as higher input costs and an unfavorable sales mix. That led to adjusted earnings per share declining to $0.79 from $0.85, which was much worse than expectations of $1.08.

2018 was a busy year for Spectrum, as the company merged with majority shareholder MRG Group, and the company sold its battery and lighting business to Energizer Holdings (NYSE: ENR)  earlier this year. Just last week, Spectrum said it would sell its auto-care business to Energizer for $1.25 billion, which sent Spectrum stock down sharply as well.

Against this backdrop, CEO David Maura said, “During the year, we completed or entered meaningful transactions and made significant management, operational and strategic changes and investments that are expected to create a more focused and financially stronger business that is well positioned for the future.”

Now what

Investors don’t seem to agree with Maura’s assessment, and the company’s outlook for 2019 did little to assuage their concerns. Management called for meaningful sales growth from continuing operations in 2018 but projected full-year adjusted EBITDA of $560 to $580 million, which was below the analyst consensus at $635.8 million.

Spectrum shares hit a five-year low on the news, as the company’s turnaround has yet to yield the desired results. Considering the broader headwinds against legacy consumer brands, Spectrum stock could continue to struggle.

10 stocks we like better than Spectrum Brands

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Spectrum Brands wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Zeen is a next generation WordPress theme. It’s powerful, beautifully designed and comes with everything you need to engage your visitors and increase conversions.

Wealth Empire Newsletter
Register now for free updates and alerts

Subscribe By

Note: I have the ability to revoke this permission at any time and ask for the removal of my personal data collected by contacting us or simply clicking Unsubscribe.