How Prestige Consumer (PBH) Looks Just Ahead of Q2 Earnings

Prestige Consumer Healthcare Inc. PBH is scheduled to report second-quarter fiscal 2019 results on Nov 1, before the market opens. In the last reported quarter, the company delivered a positive earnings surprise of 3%. Consequently, investors are keeping their fingers crossed for the upcoming release.

Which Way Are Top & Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for the quarter under review stands at 63 cents, reflecting year-over-year growth of 3.3%. We note that the Zacks Consensus Estimate has remained stable in the past 30 days. Moving on, Prestige Brands has a remarkable bottom-line history. The company’s first-quarter fiscal 2019 results marked its third successive quarter of earnings beat.

The Zacks Consensus Estimate for revenues of $238.6 million indicates a decrease of 7.5% from the year-ago quarter’s figure. We note that total revenues declined 1% in the last reported quarter.

Let’s see how things are shaping up prior to this announcement.

 

Prestige Brand Holdings, Inc. Price and EPS Surprise

Prestige Brand Holdings, Inc. Price and EPS Surprise | Prestige Brand Holdings, Inc. Quote

 

Factors to Consider

Prestige Brands boasts a strong consumption trend, spread across most of its core brands. In fiscal 2018, Prestige Brands witnessed company-wide consumption growth of approximately 3%. This trend also fueled the company’s North American OTC Healthcare segment, during the first quarter of fiscal 2019. Further, this provided cushion to the company’s overall revenues, which were otherwise marred by change in accounting policies, and unfavorable timing of the launch of new packaging for BC and Goody’s brands.  Also, revenues in the International OTC Healthcare segment declined 7.2%, caused by timing differences in shipments and distributor orders.

We note that the Zacks Consensus Estimate of International OTC Healthcare and North American OTC Healthcare segments for the to-be reported quarter is pegged at $23.2 million and $231 million, respectively. This reflects growth of 19.6% and 7.4%, respectively, from the year-ago quarter’s figure on a sequential basis.

The company has been gaining from strategic acquisitions. The acquisition of Fleet in January 2017 is one of its largest transactions. The buyout is expected to radically enhance the company’s growth prospects. In fact, the company is on track with building brands like Summer's Eve under the Fleet banner. Other noteworthy acquisitions of the company include DenTek Holdings, Inc in 2016 and Hydralyte in 2015.

However, sluggishness in the Household Cleaning business has been dampening the company’s performance. This led to the divestiture of the business in July 2018. The move is expected to help Prestige Brands focus better on healthcare business.

Further, the company is facing year-over-year increase in cost of sales for quite some time. Cost of sales increased 0.2% in the first quarter of fiscal 2019. This was preceded by increases of 3.8%, 33.3% 25.1% and 28.5% in the fourth, third, second and first quarters of fiscal 2018, respectively.  Persistence of such high costs may pose a threat to the company’s profitability. Moreover, higher freight and warehouse costs have been weighing on gross margin levels for long.

What Does the Zacks Model Say?

Our proven model does not conclusively show that Prestige Brands is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Prestige Brands has a Zacks Rank #3, an Earnings ESP of 0.00% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

E.E. Scripps Company SSP has an Earnings ESP of +3.03% and a Zacks Rank #1.

Cedar Fair, L.P. FUN has an Earnings ESP of +4.41% and a Zacks Rank #2.

PVH Corp. PVH has an Earnings ESP of +0.46% and a Zacks Rank #2.

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