Will Energizer (ENR) Stock Be Hurt Today By This Downgrade?

NEW YORK (TheStreet) -- Energizer Holdings (ENR) shares are up 2.67% to $128.47 in early market trading on Friday despite the battery maker's stock being downgraded to "market perform" from "outperform" by analysts at Wells Fargo today.

The downgrade comes a day after Warren Buffett's Berkshire Hathaway  (BRK.B)  purchased Energizer's rival Duracell for $4.7 billion from consumer product manufacturer Procter & Gamble  (PG) .

The firm believes that the $4.7 billion deal implies a lower valuation for Energizer, not a higher one, and in turn lowered their outlook on the stock's performance.

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TheStreet Ratings team rates ENERGIZER HOLDINGS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ENERGIZER HOLDINGS INC (ENR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • ENR's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 7.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for ENERGIZER HOLDINGS INC is rather high; currently it is at 50.47%. Regardless of ENR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.46% trails the industry average.
  • ENERGIZER HOLDINGS INC's earnings per share declined by 18.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ENERGIZER HOLDINGS INC reported lower earnings of $5.67 versus $6.46 in the prior year. This year, the market expects an improvement in earnings ($7.33 versus $5.67).
  • The change in net income from the same quarter one year ago has exceeded that of the Household Products industry average, but is less than that of the S&P 500. The net income has decreased by 18.9% when compared to the same quarter one year ago, dropping from $105.10 million to $85.20 million.
  • You can view the full analysis from the report here: ENR Ratings Report
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