Analyst Explains Why They Downgraded Their Rating on Spectrum Brands Holdings (SPB)

By Jason Carr

Oppenheimer analyst Ian Zaffino downgraded Spectrum Brands Holdings (SPBResearch Report) to Hold today. The company’s shares closed on Friday at $59.35, close to its 52-week low of $57.34.

Zaffino observed:

“Hurt by weakness across most key business units, Spectrum’s F4Q18 EBITDA of $134.1M missed our/Street’s $180M/$175M estimates and implied guidance midpoint of ~$181M. Last week’s decision to end the sale process of Appliances was disappointing; as it reintroduces a very low-margin business and one that is at risk to Chinese tariff risks and online sales. On a positive note, the surprise divestiture of GAC drives gross leverage down to ~3.5x, vs. 5.8x currently. Guidance for FY19 EBITDA was much lower than expectations—e.g., $560M-$580M, vs. our $650M for the business ex-GAC and Batteries. Lower F2019E EBITDA to $570M from $630M. Given the operational challenges, the failed sale of Appliances and uncertain outlook, we move to Perform from Outperform.”

According to TipRanks.com, Zaffino is a 3-star analyst with an average return of 0.7% and a 50.1% success rate. Zaffino covers the Services sector, focusing on stocks such as Servicemaster Global Holdings, Wyndham Hotels & Resorts Inc, and Wyndham Destinations Inc.

Currently, the analyst consensus on Spectrum Brands Holdings is a Moderate Buy with an average price target of $82.67, a 39.3% upside from current levels. In a report issued on November 15, Wells Fargo also maintained a Hold rating on the stock with a $70 price target.

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Spectrum Brands Holdings’ market cap is currently $511.1M and has a P/E ratio of 0.70. The company has a Price to Book ratio of 0.49.

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Spectrum Brands Holdings, Inc. engages in the manufacture of diversified consumer products. It produces consumer batteries; residential locksets; residential builders’ hardware; plumbing, shaving, and grooming products; personal care products; small household appliances; specialty pet supplies; lawn and garden and home pest control products; personal insect repellents; and auto care products. The firm offers a portfolio of brands including Rayovac, VARTA, Kwikset, Weiser, Baldwin, National Hardware, Pfister, Remington, George Foreman, Black + Decker, Tetra, Marineland, Nature’s Miracle, Dingo, 8-in-1, FURminator, IAMS and Eukanuba, Healthy-Hide, Digest-eeze, Littermaid, Spectracide, Cutter, Repel, Hot Shot, Black Flag, Liquid Fence, Armor All, STP, and A/C PRO. The company was founded on July 13, 2018 and is headquartered in Middleton, WI.