Spectrum Brands: SPB Stock Gains 3% Post Q1 Earnings: Should Investors Jump in or Wait?

In This Article: Spectrum Brands Inc. SPB has risen 2.8% since reporting first-quarter fiscal 2025 results on Feb. 6, 2025. This reflects an outperformance compared with its industry peers, the broader sector and the S&P 500 index. The Zacks Consumer Products - Discretionary industry and the S&P 500 have declined 0.8% and 0.7%, respectively, in the same period. Meanwhile, the Consumer Discretionary sector has risen 1.1% since Feb. 6. The stock's modest growth since its earnings release reflects mixed sentiments among investors following the release. Spectrum Brands exceeded the Zacks Consensus Estimate for earnings per share (EPS) in first-quarter fiscal 2025. However, its revenues lagged the same. The top and bottom lines rose 1.2% and 61.9% year over year, respectively. Organic revenues improved 1.9% in the reported quarter. Find the latest EPS estimates and surprises on Zacks Earnings Calendar. What's Behind SPB's Recent Rally? Revenues improved year over year on its brand-focused investments and e-commerce expansion. Building on last year's momentum, key business segments saw notable growth, with the Home and Personal Care (HPC) division achieving one of its best first quarters in recent history, fueled by a strong holiday season. Spectrum Brands continues to gain momentum, driven by strong e-commerce growth, strategic investments and disciplined cost management. In the first quarter of fiscal 2025, online sales outpaced in-store sales, contributing more than 30% in global HPC revenues and around the mid-20% range for GPC. To sustain this growth, the company is expanding inventory levels, improving fill rates, and launching products both online and in stores. Management expects e-commerce to remain a key driver, with digital sales growing faster than brick-and-mortar sales throughout fiscal 2025. In addition to e-commerce expansion, Spectrum Brands is benefiting from pricing actions, cost efficiencies and a favorable product mix, all of which have supported margin growth. The company has implemented cost-cutting measures, including workforce reductions and lower advertising spending, while also navigating new U.S. tariffs on China imports. For fiscal 2025, SPB anticipates low-single-digit net sales growth and a mid to high-single-digit rise in adjusted EBITDA, supported by ongoing cost improvements. Investments in technology, marketing and brand-building, including $62 million allocated in fiscal 2024, are expected to drive long-term profitability, with meaningful benefits materializing in 2025. Is SPB's Overall Share Performance Just as Impressive? Spectrum Brands' shares have experienced volatility over the past year. A closer look at the stock's one-year performance reveals that it has underperformed the industry in this period. Specifically, the SPB stock has lost 8.7% in the past year against the industry and the sector's rallies of 15.1% and 14.1%, respectively. The stock also compared unfavorably against the S&P 500's 21.3% growth. Spectrum Brands' One-Year Price Performance Zacks Investment Research Image Source: Zacks Investment Research Currently priced at $78.53, the SPB stock trades close to its 52-week low of $74.72. The Spectrum Brands stock is trading at an 18.8% discount from its 52-week high of $96.74. The stock is trading below its 50-day and 200-day moving averages, indicating a bearish sentiment. Spectrum Brands faces ongoing geopolitical and macroeconomic uncertainties, impacting its restructuring efforts and financial flexibility. Foreign currency fluctuations and delays in divesting the HPC segment could limit its ability to unlock shareholder value, reinvest in high-growth areas, or efficiently return capital. Additionally, rising costs from tariff expirations and newly imposed duties on key product lines are straining margins. While management is working to shift production away from China, these transitions take time, and near-term profitability may suffer before cost-saving measures take effect. Currency headwinds challenge Spectrum Brands, particularly in its Global Pet Care (GPC) and HPC segments. With one-third of GPC's business in Europe, a strong U.S. dollar against the euro and other key currencies could dampen reported sales growth and pressure earnings. Until currency fluctuations and trade tensions stabilize, the company may struggle to maintain profit margins and offset rising costs. Mixed Estimate Revision Trend for SPB The Zacks Consensus Estimate for SPB's fiscal 2025 EPS moved down 2.1% in the last seven days, indicating negative near-term sentiment among analysts for the company's earnings. Meanwhile, the Zacks Consensus Estimate for fiscal 2026 EPS has moved up 2.1% in the past seven days. For fiscal 2025, the Zacks Consensus Estimate for Spectrum Brands' sales and EPS implies 0.5% and 24.6% year-over-year growth, respectively. The consensus mark for fiscal 2026 sales and earnings indicates 1.8% and 14.9% year-over-year increases, respectively. Zacks Investment Research Image Source: Zacks Investment Research Does Valuation Discount Suggest Growth Potential? SPB is currently trading at a forward 12-month P/E ratio of 14.98X, below its five-year median of 17.82X and the S&P 500's average of 22.45X, indicating potential for upside. Trading much below its five-year median and the market at large, the company's current valuation appears more affordable and appealing, presenting an opportunity to accumulate shares. The stock's current Value Score of A validates its appeal. Zacks Investment Research Image Source: Zacks Investment Research How to Play the SPB Stock? Spectrum Brands is making strategic moves to drive growth, with strong e-commerce momentum, cost efficiencies and brand investments supporting its long-term prospects. While margin improvements and digital expansion are positive, near-term challenges like tariffs and macroeconomic pressures remain. Given the near-term challenges, a cautious investment approach is advisable, with investors monitoring sales trends and cost-saving initiatives. Those with a long-term perspective may consider holding on to the stock, as brand investments and operational efficiencies could yield benefits in 2025. For new investors, waiting for a better entry point amid market fluctuations may be a prudent strategy for this Zacks Rank #3 (Hold) stock. Better-Ranked Stocks to Consider Some better-ranked companies are Central Garden & Pet CENT, The Honest Company HNST and Interparfums, Inc. IPAR. Central Garden, one of the leading companies in the U.S. pet supplies and lawn and garden supplies space, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here . Central Garden has a trailing four-quarter earnings surprise of 208.7%, on average. The Zacks Consensus Estimate for CENT's fiscal 2025 sales and EPS indicates increases of 1% and 8.4%, respectively, from the year-ago period's reported levels. The Honest is a digitally-native, mission-driven brand focused on leading the clean lifestyle movement, creating a community for conscious consumers and seeking to disrupt multiple consumer product categories. HNST currently flaunts a Zacks Rank #1. The consensus estimate for HNST's 2025 sales and EPS suggests growth of 6.1% and 157.1%, respectively, from the year-ago period's reported levels. HNST has a trailing four-quarter earnings surprise of 80%, on average. Interparfums is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. IPAR carries a Zacks Rank of 2 (Buy) at present. The Zacks Consensus Estimate for Interparfums' 2025 sales and EPS indicates growth of 3.7% each from the year-ago reported figures. IPAR has a trailing four-quarter negative earnings surprise of 3.8%, on average. 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 Central Garden & Pet Company (CENT) : Free Stock Analysis Report Interparfums, Inc. (IPAR) : Free Stock Analysis Report Spectrum Brands Holdings Inc. (SPB) : Free Stock Analysis Report The Honest Company, Inc. (HNST) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Zacks Investment Research Zacks Investment Research Zacks Investment Research