Is Spectrum Brands Stock a Buy?
This has been a year of twists and turns for Spectrum Brands (NYSE: SPB). The diversified consumer goods company has struggled recently with stagnant sales and falling profits, which led management to the (correct) conclusion that bigger isn't always better. With its fiscal 2019 in the books and the company embarking on its fiscal 2020 significantly lighter than before, investors may be wondering if the stock is a buy.
For starters, let's acknowledge that even after a rally of 46% so far in 2019, with just two weeks left to go in the year as I write, Spectrum is still some 50% below the 21st-century high it hit back in 2017. A superficial look might suggest that the company is still a solid investment, and in some ways it is. In its fiscal Q4 report, management revealed it had authorized a new $250 million share repurchase plan. That's about 8% of Spectrum's current market cap of $3.1 billion, and decreasing the share count should give a nice boost to EPS. It's also not a bad return of cash to shareholders when paired with a dividend that currently yields 2.7%.
Spectrum's balance sheet also looks far better now than it has in years past, thanks in large part to the sale of its Rayovac battery business (for $2 billion in cash) and its Armor All auto care and STP motor oil businesses (for $939 million in cash and 5.3 million in acquired shares) to Energizer Holdings in a set of deals that wrapped up in January. Spectrum's total debt net of cash on the balance sheet was $1.72 billion at the end of fiscal 2019, compared with $4.10 billion a year prior. Interest rates on the debt remaining have also been lowered, with $300 million of new 10-year duration notes at 5% interest replacing old ones carrying a 6.625% rate. All good stuff.
Source Fool.com
