Will Spectrum Brands (SPB) Stock Be Helped By Purchase of P&G's (PG) European Pet Food Business?

NEW YORK (TheStreet) -- Spectrum Brands Holdings  (SPB) , a consumer products company, said it would buy Procter & Gamble's (PG)  European pet food business, which includes the Iams and Eukanuba dog and cat food brands.

Terms of the deal were not disclosed.

The business has approximately $200 million of annual sales and will provide Spectrum Brands' United Pet Group division access to the $21 billion European dog and cat food market which is growing at an estimated 3% to 5% annually.

  
Shares of Spectrum Brands closed yesterday at $86.13.
 

TheStreet Ratings team rates SPECTRUM BRANDS HOLDINGS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate SPECTRUM BRANDS HOLDINGS INC (SPB) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, expanding profit margins, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SPB's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Products industry. The net income increased by 116.0% when compared to the same quarter one year prior, rising from $36.13 million to $78.05 million.
  • 40.58% is the gross profit margin for SPECTRUM BRANDS HOLDINGS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.91% trails the industry average.
  • Powered by its strong earnings growth of 113.04% and other important driving factors, this stock has surged by 29.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • SPECTRUM BRANDS HOLDINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SPECTRUM BRANDS HOLDINGS INC swung to a loss, reporting -$1.06 versus $0.92 in the prior year. This year, the market expects an improvement in earnings ($4.25 versus -$1.06).
  • You can view the full analysis from the report here: SPB Ratings Report
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