Time New York: Wed 11 Dec 04:27 am  |  Save 15% on H&R Block Online

  
caticonslite_bm_alt

Prestige Consumer Gains on Strong Margins & Robust Cash Flow

Zacks

Prestige Consumer Healthcare Inc. PBH is gaining from well-chalked growth strategies, which include acquisitions, strong cash position and solid margin trend. The company’s business transformation efforts, which aim at expansion of healthcare offerings, are also noteworthy.

Let’s delve deeper.

A Brief Introspection

A sturdy margin trend bodes well for Prestige Consumer. Notably, the company’s gross margin expanded 230 basis points (bps) to 57.7% in first-quarter fiscal 2020, driven by the divestiture of the Household Cleaning segment. The company’s margins expanded 160 bps, 310 bps and 220 bps in the second, third and fourth quarters of fiscal 2019, respectively. Continuation of such trends should aid the bottom line in the days ahead. Management envisions adjusted earnings per share of $2.76-$2.83 for fiscal 2020, up from $2.78 reported in the previous year.

Further, Prestige Consumer, which shares space with Funko FNKO, Container Store TCS and Spectrum Brands SPB, boasts robust free cash flow. The company generated free cash flow of approximately $51 million in the fiscal first quarter, which helped it reduce debt by $20 million and facilitated share repurchases of roughly $30 million. Management expects adjusted free cash flow of $200 million or more for fiscal 2020.

These apart, strong consumption trends in the healthcare category have prompted Prestige Consumer to transform its business. Well, changing the company name from Prestige Brands Holdings, Inc to Prestige Consumer Healthcare, Inc during the second quarter of fiscal 2019 is a step toward that direction. This move is an important milestone for the company that prides on having a strong portfolio of healthcare brands. Moreover, management stated that focusing on areas that have greater growth prospects, such as healthcare, will help the company utilize resources efficiently.

Additionally, Prestige Consumer pursues mergers and acquisitions to boost growth. In this regard, the acquisition of Fleet in January 2017 is one of the company’s largest transactions. In 2012, Prestige Consumer acquired BC & Goody's, which aided expansion of its distribution channel and customer reach. Moreover, the company is on track with its strategy of improving brands and marketing capabilities of its acquired businesses. In line with this, it recently came up with new packaging for its BC & Goody’s brands. Other noteworthy acquisitions of the company include DenTek Holdings, Inc in 2016 and Hydralyte in 2015. These acquisitions have enhanced the company’s portfolio.

However, a persistent decline in the company’s sales is a concern. Sales declined for the fifth straight time in the first quarter of fiscal 2020. This along with currency headwinds post a threat. Having said that, we hope the company’s solid growth prospects will yield results and counter the aforementioned hurdles.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>


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

To read this article on Zacks.com click here.

Zacks Investment Research
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.