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Prestige Brands (PBH) Down 9.7% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Prestige Brands (PBH). Shares have lost about 9.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Prestige Brands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Prestige Consumer’s Q1 Earnings & Revenues Beat Estimates

Prestige Consumer Healthcare reported first-quarter fiscal 2021 results, which gained from solid e-commerce performance along with strong free cash flow, which in turn was driven by EBITDA growth and a disciplined capital allocation strategy. However, management refrained from providing any full-year guidance, citing the uncertainties surrounding the ongoing COVID-19 situation.

The company posted adjusted earnings of 86 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents. This marked its 10th consecutive quarter of earnings beat. Quarterly earnings also improved 32.3% year over year.

Total revenues fell 1.2% to $229.4 million but surpassed the Zacks Consensus Estimate of $222 million. Organic revenues edged down 0.6% (excluding currency effects). The downside can be attributable to lower consumption for certain product categories, stemming from ongoing COVID-19 pandemic. On the flip side, robust consumption trends in most of the company’s products and gains from higher retailer orders provided some cushion to the stock.

Gross profit came in at $133.9 million, down 0.1% from the prior-year quarter’s figure. Meanwhile, gross margin expanded 70 basis points (bps) to 58.4%. Adjusted EBITDA was $87.6 million, up 12.1% year over year. However, adjusted EBITDA margin expanded 450 bps to 38.2%.

Segment Performance

Revenues in the North American OTC Healthcare segment were $210.7 million, down 0.05% year over year. This is mainly due to sluggish consumption in certain product categories, which have been hurt by the ongoing COVID-19 crisis. However, gains related to higher retailer order patterns aided results.

Revenues in the International OTC Healthcare segment totaled $18.7 million, down 12.3% from the year-ago quarter’s figure. The downside can be attributed to higher retailer order patterns. This was partly negated by sluggish consumption in certain product categories and currency headwinds of roughly $1 million.

Financial Updates

The company exited the quarter with cash and cash equivalents of $57.9 million, long-term debt (net) of $1,620.6 million and total shareholders’ equity of approximately $1,227 million. Net cash provided by operating activities in the reported quarter was $75.2 million. Adjusted free cash flow for the quarter amounted to $72.6 million. As of Jun 30, the company’s net debt position was about $1.6 billion. In the quarter under review, Prestige Consumer lowered debt by $111 million.

Q2 Guidance

Management now anticipates revenues in the fiscal second quarter to be at least $225 million. Also, the bottom line is expected to be at least 70 cents during the second quarter, driven by cost management policies. The guidance includes sudden changes in consumer preferences and supply-chain disruptions as a result of the ongoing COVID-19 pandemic.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Prestige Brands has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Prestige Brands has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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