Prestige Consumer (PBH) Surges More Than 65% YTD: Here’s Why


Prestige Consumer Healthcare Inc. (PBH Quick QuotePBH ) is in a robust shape, courtesy of its solid e-commerce business. The company’s transition into a healthcare focused entity is noteworthy. The currently Zacks Rank #2 (Buy) stock has surged 65.7% so far this year against the industry’s 29.7% decline. The same has also come against the Zacks Consumer Discretionary sector’s 2% dip in the period.

The company raised its fiscal 2022 guidance after posting splendid first-quarter fiscal 2022 results wherein both the top and the bottom line increased year over year and beat the Zacks Consensus Estimate as well.

Let’s delve deeper.

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Solid Performance, Bullish Outlook

Prestige Consumer’s results for the fiscal first quarter gained from its brand-building strategy, market share gains in leading brands and a significant increase in demand for certain categories and channels. Results benefited from surging sales from brands gaining on travel-related activity as vaccination rates improve. During the quarter, adjusted earnings of $1.14 per share advanced 32.6% on higher sales and lower interest expenses. Total revenues increased 17.3% to $269.2 million on the back of strength in key brands, driven by healthy demand across certain categories and channels.

Driven by impressive quarterly results, continued recovery of COVID-impacted brands and a positive business momentum management raised its fiscal 2022 view. The company now anticipates revenues worth $1,045 million or more, up from the earlier view of $957-$962 million. Organic growth is projected to be 6%, which reflects a sharp improvement from the previously estimated 1.5-2%. Finally, the company envisions adjusted earnings per share of $3.90 or more, up from $3.58 or more predicted before. In fiscal 2021, Prestige Consumer’s top and the bottom line were at $943.4 million and $3.24 per share, respectively.

Factors Driving Growth

Prestige Consumer has been making multi-year e-commerce investments for a while now, which continued to yield results in the first quarter of fiscal 2022. The company saw year-over-year double-digit consumption growth in the e-commerce channel during the quarter. This upside can be attributed to consumers’ growing shift to online shopping. In fiscal 2021, e-commerce sales doubled and constituted nearly 11% of the company’s revenues. With consumers increasingly shifting to the online mode of shopping, especially amid the pandemic-led social distancing, the e-commerce channel is likely to remain strong and Prestige Consumer’s investments in this arena are expected to keep it well placed.

Prestige Consumer is on track with the complete transformation of its business, thereby focusing solely on healthcare. Concentrating on the areas that have greater prospects, such as healthcare, the company will be able to utilize its resources efficiently. It recently acquired TheraTears and four other over-the-counter consumer brands across the VMS and Cough & Cold categories from Akorn Operating Company LLC. TheraTears and other brands, purchased on Jul 1, are likely to add $40 million worth revenues and 7 cents of adjusted earnings per share to the company’s fiscal 2022 results. These buyouts are likely to enhance Prestige Consumer’s footing in the eye care space.

We believe that the above-mentioned upsides are likely to keep working for Prestige Consumer.

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