On Thursday, Canaccord Genuity updated its outlook on shares of Helen of Troy (NASDAQ:HELE), increasing the price target to $92.00 from the previous $84.00 while maintaining a Buy rating on the stock. The adjustment follows the company's second-quarter fiscal year 2025 results, which were reported before market open on Tuesday.
Helen of Troy's sales decreased by 3.5% year-over-year, which was better than both the analyst and consensus estimates that predicted a 6.0% and 6.7% decline, respectively. The company also surpassed its own sales guidance, which ranged from a 7% to a 4% decrease.
The adjusted earnings per share (EPS) for the quarter came in at $1.21, exceeding the anticipated $1.05 from both Canaccord Genuity and consensus estimates. Despite the fact that the adjusted EPS represented a 30.6% drop compared to the same quarter last year, it was still above the forecasted range of a 45% to 35% decline.
The stronger-than-expected sales were attributed to early achievements in Helen of Troy's "Reset and Revitalize" initiative, which includes enhanced marketing, innovation efforts, and expanded distribution. The company also experienced less disruption from automation issues at its Tennessee distribution center (DC).
Management highlighted that these efforts have resulted in market share gains in eight key categories and a 9% year-over-year increase in U.S.-weighted distribution for the fiscal year to date.
Looking forward, Helen of Troy's management expressed confidence in their distribution center's performance, which is now meeting customer service expectations and is projected to achieve improved productivity targets by the end of the fiscal year. The company is also witnessing initial success with new product innovation and brand-building strategies.
Canaccord Genuity's analyst pointed out that despite a recent increase in the stock price, Helen of Troy is still trading below 10 times its forecasted fiscal year 2 earnings, a figure which is historically in the mid-teen range. The firm's optimism is based on the belief that there is significant potential for growth as management continues to implement its growth and Pegasus savings plan.
In other recent news, consumer products company Helen of Troy reported Q2 fiscal 2025 results exceeding market expectations. The company saw a 9% increase in U.S. distribution and significant international sales growth, despite a consolidated net sales decline of 3.5% attributed to decreased demand in the Beauty & Wellness sector.
Adjusted EPS and net income were reported at $1.21 and $17 million respectively. In the same vein, DA Davidson has raised the price target for Helen of Troy from $67.00 to $71.00, while maintaining a Neutral rating on the stock.
The company's strategic initiative, Project Pegasus, is contributing to its performance, with the integration of Curlsmith into the distribution network ahead of schedule. However, the divestiture process has been paused due to unsatisfactory offers. Helen of Troy anticipates full-year net sales to be between $1.885 billion and $1.935 billion, with adjusted EPS expected between $7 and $7.50.
The company is investing in brand innovation and marketing, while planning to reduce tariff exposure by diversifying production outside of China. These are some of the recent developments shaping the company's trajectory.
InvestingPro Insights
Helen of Troy's recent performance and Canaccord Genuity's optimistic outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $1.67 billion, with a P/E ratio of 10.35, indicating that the stock may be undervalued relative to its earnings. This aligns with Canaccord Genuity's observation that the stock is trading below historical levels.
InvestingPro Tips highlight that management has been aggressively buying back shares, which often signals confidence in the company's future prospects. Moreover, Helen of Troy boasts a high shareholder yield, potentially making it an attractive option for value investors.
Despite recent challenges, including a 3.96% revenue decline in the last twelve months, the company maintains a strong gross profit margin of 47.8% and an operating income margin of 11.42%. These figures suggest that Helen of Troy is managing its costs effectively, even in a challenging sales environment.
Investors should note that Helen of Troy has shown significant short-term momentum, with a 19.47% return over the last week and a 35.02% return over the last month. This recent performance may be reflecting the market's positive reaction to the company's better-than-expected Q2 results and the progress of its "Reset and Revitalize" initiative.
For those interested in a deeper analysis, InvestingPro offers 12 additional tips for Helen of Troy, providing a comprehensive view of the company's financial health and market position.
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