Breaking Down Spectrum Brands Holdings, Inc. (SPB) Financial Health: Key Insights for Investors

Understanding Spectrum Brands Holdings, Inc. (SPB) Revenue Streams

Understanding Spectrum Brands Holdings, Inc.’s Revenue Streams

The company generates its revenue from various segments, primarily categorized into Global Product Categories (GPC), Home & Garden (H&G), and Home & Personal Care (HPC). The following table outlines the net sales and year-over-year growth for the three and nine month periods ended June 30, 2024, compared to the corresponding periods in 2023.

The total revenue for the three-month period increased by $43.9 million or 6.0%, while the nine-month period showed a modest increase of $12.1 million or 0.6%. The growth in revenue was primarily driven by the Home & Garden segment, which saw a significant increase of 13.1% in the latest quarter.

Year-over-Year Revenue Growth Rate

In examining the year-over-year growth rates, the Home & Garden segment outperformed the others, reflecting a robust demand in seasonal products, while the Home & Personal Care segment experienced a slight decline over the nine-month period, indicating challenges in certain product lines.

Contribution of Different Business Segments to Overall Revenue

As per the latest financial statements, the contribution of each segment to total revenue for the nine-month period is detailed below:

The Global Product Categories accounted for the largest share of revenue, emphasizing its critical role in the company's overall financial performance.

Analysis of Significant Changes in Revenue Streams

The revenue analysis reveals significant changes, particularly in the Home & Garden segment, which saw an increase of 13.1% in the most recent quarter compared to the previous year. This growth can be attributed to favorable weather conditions and increased retail traffic, which boosted sales of seasonal products. In contrast, the Home & Personal Care segment faced challenges, with revenue declining by 2.5% in the nine-month period. This decrease is linked to reduced consumer demand and distribution losses in certain product lines.

The comprehensive revenue analysis indicates a mixed performance across the segments, with notable growth in Home & Garden while highlighting the need for strategic adjustments in the Home & Personal Care category.

A Deep Dive into Spectrum Brands Holdings, Inc. (SPB) Profitability

Profitability Metrics

Gross Profit

For the three-month period ended June 30, 2024, the gross profit was $302.8 million, compared to $263.5 million for the same period in 2023, representing a 14.9% increase. For the nine-month period, gross profit was $821.2 million, up from $679.9 million, a 20.8% increase.

Gross Profit Margin

The gross profit margin for the three-month period was 38.9%, up from 35.8% the previous year, an increase of 310 basis points. For the nine-month period, the margin improved to 37.5%, compared to 31.2%, an increase of 630 basis points.

Operating Profit

The operating profit for the three-month period ended June 30, 2024, was $33.4 million, compared to $92.8 million for the same period in 2023. For the nine-month period, operating profit was $141.5 million, down from $340.9 million.

Net Profit

Net income for the three-month period was $6.0 million, a significant decrease from $1,859.6 million in the previous year. For the nine-month period, net income was $96.0 million, compared to $1,785.5 million.

Profitability Ratios Comparison

In comparison to industry averages, the company’s gross profit margin of 38.9% is above the industry average of 35%, indicating strong pricing power and cost management. The operating margin stands at 4.3%, slightly below the industry average of 5%.

Operational Efficiency Analysis

The selling, general, and administrative expenses for the three-month period ended June 30, 2024, totaled $255.1 million, or 32.7% of net sales, compared to $223.4 million, or 30.4% the previous year. This increase is primarily due to higher marketing expenditures.

Debt vs. Equity: How Spectrum Brands Holdings, Inc. (SPB) Finances Its Growth

Debt vs. Equity: How Spectrum Brands Holdings, Inc. Finances Its Growth

Overview of Debt Levels

As of June 30, 2024, the company reported total liabilities of $1,670.2 million, which includes current liabilities of $859.5 million and noncurrent liabilities of $945.8 million. The long-term debt consists of various senior notes with maturity dates ranging from 2026 to 2031, totaling approximately $1,174.4 million.

Debt-to-Equity Ratio

The debt-to-equity ratio stands at approximately 0.80 following the latest financials, calculated by dividing total liabilities by total shareholders' equity of $2,085.1 million. This ratio is relatively favorable compared to the industry average of 1.0, indicating a more conservative leverage position.

Recent Debt Issuances

On May 23, 2024, the company completed an offering of $350.0 million principal amount of 3.375% Exchangeable Senior Notes due June 1, 2029. Additionally, during the nine-month period ended June 30, 2024, the company repurchased $180.1 million of outstanding Senior Notes, which resulted in a $4.7 million gain from the early extinguishment of those obligations.

Credit Ratings

The company maintains a credit rating of B3 from Moody's and B- from S&P, reflecting a stable outlook despite the higher debt levels.

Balancing Debt Financing and Equity Funding

The company has strategically balanced its financing through a combination of debt and equity funding. In June 2023, it executed an accelerated share repurchase agreement for $500.0 million to repurchase common stock, indicating a focus on returning value to shareholders while managing debt levels.

Assessing Spectrum Brands Holdings, Inc. (SPB) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

The current ratio for the company as of June 30, 2024, stands at 1.37, indicating a healthy liquidity position to cover short-term liabilities. The quick ratio, which excludes inventory from current assets, is 1.00, demonstrating adequate liquidity without relying on inventory sales.

Analysis of Working Capital Trends

As of June 30, 2024, the working capital is reported at $317.7 million, a significant improvement from $1.3 billion in the previous year. This trend highlights an ongoing effort to optimize capital management in light of recent divestitures and operational restructuring.

Cash Flow Statements Overview

The cash flow from operating activities for the nine months ended June 30, 2024, totaled $178.4 million, a notable increase from $72.5 million in the prior year. This growth is attributed to improved sales and operational efficiencies.

In terms of investing activities, cash flows amounted to $885.0 million, a decrease from $4.293 billion in the previous year, primarily due to the completion of a significant divestiture.

Cash flows from financing activities showed a net outflow of $1.563 billion, compared to $1.706 billion in the previous period, reflecting ongoing debt repayments and stock repurchase initiatives.

Potential Liquidity Concerns or Strengths

Despite a strong current ratio, the reduction in working capital may raise concerns regarding the company's ability to meet unexpected short-term obligations. However, the availability of $490.4 million under the credit facility enhances liquidity flexibility.

Additionally, the company has a robust cash reserve, bolstered by proceeds from recent divestitures, which allows for strategic investments and debt repayments.

Is Spectrum Brands Holdings, Inc. (SPB) Overvalued or Undervalued?

Valuation Analysis

Price-to-Earnings (P/E) Ratio

The price-to-earnings ratio for the company stands at $0.21 per share for the latest quarter, with a diluted earnings per share (EPS) of $0.21 compared to $46.07 in the previous year. This reflects a significant decline in profitability, impacting the valuation based on earnings.

Price-to-Book (P/B) Ratio

The price-to-book ratio is calculated as follows: with total shareholders' equity at $2,084.6 million and total shares outstanding at 28.0 million, the P/B ratio is approximately $74.5. This suggests that the stock is trading at a significant premium to its book value.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The enterprise value (EV) is calculated using the formula: EV = Market Capitalization + Total Debt - Cash. As of the latest report, the market capitalization is approximately $2,084.6 million, total debt is $1,174.4 million, and cash equivalents are $1,177.2 million. Thus, the EV is around $2,081.8 million. The adjusted EBITDA for the latest period is $148.6 million, leading to an EV/EBITDA ratio of approximately 14.0.

Stock Price Trends

Over the last 12 months, the stock price has seen considerable fluctuation. The stock price started at $75.00 and has ranged up to a high of $86.22 and a low of $65.84. As of the latest data, the stock is trading at $88.72, indicating a positive trend in the stock price over recent months.

Dividend Yield and Payout Ratios

The company has maintained a consistent dividend payout of $0.42 per share. Given the current stock price of $88.72, the dividend yield is approximately 0.47%. The payout ratio stands at 20%, indicating a sustainable dividend policy.

Analyst Consensus

Analysts currently have a mixed consensus on the stock, with a breakdown as follows: Buy (40%), Hold (50%), and Sell (10%). This indicates a cautious outlook among analysts, reflecting the company's recent performance and market conditions.

Key Risks Facing Spectrum Brands Holdings, Inc. (SPB)

Key Risks Facing Spectrum Brands Holdings, Inc.

Overview of Internal and External Risks

Spectrum Brands Holdings, Inc. faces several internal and external risks that could impact its financial health significantly. These include:

• Industry Competition: The company operates in a highly competitive environment, with numerous players in the consumer goods sector. This competition can lead to price wars and reduced margins.
• Regulatory Changes: Changes in regulations, especially regarding product safety and environmental standards, can necessitate costly adjustments in operations.
• Market Conditions: Economic fluctuations, including inflation and changes in consumer spending patterns, can adversely affect sales.

Operational, Financial, or Strategic Risks

Recent earnings reports have highlighted several operational and financial risks:

• Impairment Charges: The company reported a significant impairment charge of $39.0 million on indefinite-lived intangible assets for the nine-month period ending June 30, 2024.
• Debt Levels: As of June 30, 2024, total liabilities amounted to $1,670.2 million, which poses a risk if cash flow does not sufficiently cover debt obligations.
• Foreign Currency Fluctuations: The company experienced a foreign currency translation loss of $7.7 million for the three-month period ending June 30, 2024.

Mitigation Strategies

The company has implemented several strategies to mitigate identified risks:

• Cost Improvement Initiatives: These initiatives have led to operating cost reductions, contributing to an improved adjusted EBITDA margin of 20.5% for the three-month period ending June 30, 2024.
• Debt Management: The company refinanced its debt, extending maturity to October 19, 2028, and reducing the capacity of its revolving credit facility to $500.0 million.

Future Growth Prospects for Spectrum Brands Holdings, Inc. (SPB)

Future Growth Prospects for Spectrum Brands Holdings, Inc.

Analysis of Key Growth Drivers

The company is focusing on several key growth drivers, including product innovation, market expansion, and strategic acquisitions.

• Product Innovations: The company is investing in R&D to enhance its product offerings, particularly in the Home & Garden segment, which saw net sales increase by 13.1% to $211.0 million in the three-month period ended June 30, 2024, compared to $186.6 million the previous year.
• Market Expansions: E-commerce distribution has expanded significantly, contributing to positive sales growth across various segments. The company reported organic net sales growth of 4.1% in the General Product category.
• Acquisitions: Recent acquisitions have been aimed at enhancing the product portfolio and market reach, particularly in the pet care segment, which showed an increase in net sales.

Future Revenue Growth Projections and Earnings Estimates

Projected revenue growth remains positive, with analysts estimating a compound annual growth rate (CAGR) of 5% to 7% over the next five years. Earnings estimates for fiscal year 2024 suggest a potential earnings per share (EPS) increase to approximately $3.10, up from $3.09 in 2023.

Strategic Initiatives or Partnerships

The company has entered into a new $500 million common stock repurchase program, which is expected to enhance shareholder value and provide liquidity for future growth initiatives. Additionally, partnerships with major retailers are being strengthened to boost product visibility and sales.

Competitive Advantages

The company maintains several competitive advantages that position it favorably for growth:

• Diverse Product Range: The company offers a wide variety of products across multiple categories, allowing it to cater to different consumer needs and preferences.
• Strong Brand Recognition: Established brands within its portfolio lead to customer loyalty and repeat purchases.
• Operational Efficiency: Cost-saving initiatives have led to improved margins, with adjusted EBITDA margins increasing to 20.5% in the Home & Garden segment.

Overall, the future growth prospects for the company appear robust, driven by innovation, strategic positioning in the market, and strong operational capabilities.