Energizer Q3 Earnings Miss Estimates on Margin & Mix Pressure

ENR's Organic Growth Reflects Volume Gains

Organic growth included a 1.9% volume contribution from global distribution gains and new products in the Batteries & Lights segment. Auto Care contributed 2.2% growth, primarily reflecting higher refrigerant distribution in North America.

These gains were partly offset by a 1.4% pricing decline stemming from increased promotional investments in Batteries & Lights. The expiration of an acquired brand license related to Advanced Power Solutions ("APS") reduced reported sales by $17.2 million, representing a 2.4% acquisition-related headwind, while favorable currency contributed a 1% benefit.

Energizer's Margin & Cost Details

In the fiscal third quarter, adjusted gross profit declined 8.8% year over year to $287.7 million, while the adjusted gross margin contracted 560 basis points to 39.2%, which lagged our estimate of 40%. The decline primarily reflected unfavorable product mix, increased promotional investments and the absence of prior-year out-of-period production credits. Excluding those credits, adjusted gross margin declined approximately 200 basis points. These pressures were partially offset by favorable currency impacts. 

The reported gross margin fell to 38.2% from 55.1%, with the year-ago result benefiting from $112.4 million of production credits, including $78.5 million tied to fiscal 2023 and 2024 production.

Cost discipline remained a focus during the quarter. Adjusted Selling, General and Administrative Expense (SG&A) expenses declined 1.2% year over year to $122.1 million and, as a percentage of net sales, improved 40 basis points to 16.6%. We expected adjusted SG&A expenses, as a percentage of net sales, to be 16% in the fiscal third quarter. The improvement was driven by approximately $8 million in Project Momentum savings and lower stock compensation expense, partly offset by higher legal costs.

Advertising and promotion expenses decreased 3.9% year over year to $41.9 million. Advertising and promotion expenses were 5.7% of net sales in the fiscal third quarter compared with 6% in the year-ago period.

Adjusted EBITDA declined 8.8% year over year to $138.7 million as lower gross margins more than offset benefits from lower SG&A, advertising and Research and Development (R&D) spending. Excluding out-of-period production credits, the decline was 8.6%. The adjusted EBITDA margin contracted about 210 basis points to 18.9%.

ENR Batteries & Lights Segment Sees Organic Growth

Net sales in the Batteries and Lights segment declined 2% year over year to $524.2 million. Organic net sales increased 0.3%, supported by expanded distribution, innovation and continued market share gains despite the APS license expiration. Favorable currency also aided reported sales.

Segment profit declined 19.5% year over year to $127.9 million. The decline primarily reflected the absence of prior-year out-of-period production credits, along with lower gross margins driven by unfavorable product mix and increased promotional investments.

Management highlighted continued category outperformance supported by innovation, including the launch of Energizer Ultimate Child Shield, the world's only coin lithium battery designed to help prevent ingestion burns if swallowed, along with expanded distribution across key retail customers.

Energizer's Auto Care Delivers Strong Sales Growth

The Auto Care segment generated net sales of $209.9 million, up 10.4% year over year. Organic net sales increased 9.5%, driven by strong refrigerant demand and higher distribution in North America.

Segment profit declined 14.1% year over year to $20.7 million, as robust growth in lower-margin refrigerant products pressured profitability.

Management noted that while refrigerants drove third-quarter performance, premium Appearance products remain a significant long-term growth opportunity. The company continues expanding its premium Armor All Podium Series portfolio to strengthen its competitive position and improve portfolio quality.

ENR's Cash Flow Supports Deleveraging & Shareholder Returns

For the first nine months of fiscal 2026, Energizer generated $156 million in operating cash flow and $105 million in free cash flow, representing 4.9% of net sales. The company continued to prioritize cash generation as a key component of its long-term value creation strategy.

Debt reduction remained the company's highest capital allocation priority. Through the fiscal third quarter, Energizer reduced debt by more than $80 million and continues to expect fiscal 2026 debt repayment of $150-$200 million. The company paid a quarterly dividend of 30 cents per share, returning $20.6 million to its shareholders during the quarter and approximately $65 million during the first nine months of fiscal 2026.

Management expects free cash flow to strengthen further as Project Momentum cash costs decline, capital expenditures normalize by roughly $30 million annually and the company collects the remaining $53 million of IEEPA tariff recoveries.

APS Transition Weighs on Reported Sales in Third-Quarter

The APS acquisition continued to affect reported results during the fiscal third quarter.

Energizer completed the APS acquisition on May 2, 2025, and sold batteries under an acquired brand license through Dec. 31, 2025. The expiration of that license reduced reported net sales by $17.2 million, representing a 2.4% headwind. However, sales generated as customers transitioned to Energizer's legacy brands were included within organic sales, contributing to its 2.7% organic sales growth.

Management said the APS transition remains an important element of the portfolio strategy as it strengthens the branded portfolio and expands distribution while migrating customers to Energizer's core brands.

Energizer Updates Fiscal 2026 Outlook

Looking ahead, Energizer expects fiscal fourth-quarter organic net sales to be flat to down low single digits year over year, reflecting muted battery category trends and some refrigerant demand shifting into the fiscal third quarter.

The company expects fiscal fourth-quarter adjusted earnings of $1.25-$1.35 per share, representing approximately 25% year-over-year growth at the midpoint, driven by productivity initiatives, supply-chain optimization and actions taken throughout the year to strengthen profitability.

For fiscal 2026, Energizer expects organic net sales to decline low single digits compared with its previous expectation of roughly flat organic sales with growth returning in the second half.

The company also expects adjusted earnings per share at the low end of the previously guided range of $3.30-$3.60, compared with its earlier expectation for the high end of the range. Likewise, adjusted EBITDA is expected at the low end of the prior $580-$610 million range rather than the high end previously anticipated.

Management expects continued investments in distribution expansion, innovation, operational improvements and customer transitions to support continued outperformance compared with the battery category, strengthen its competitive position and drive long-term earnings and free cash flow growth despite a challenging consumer environment.

ENR Stock Past Three-Month Performance

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Shares of this Zacks Rank #3 (Hold) company have risen 20.4% over the past three months compared with the industry’s 4.5% growth.

Some Better-Ranked Bets

We have highlighted three better-ranked stocks, namely Newell Brands Inc. NWL, WD-40 Company WDFC and Purple Innovation Inc. PRPL.

Newell Brands is a global manufacturer and marketer of consumer and commercial products. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NWL delivered a trailing four-quarter earnings surprise of 40%, on average. The consensus estimate for Newell Brands’ current fiscal-year sales indicates growth of 1% from the year-ago period’s reported figures.

WD-40 develops, markets and sells maintenance and cleaning products used to lubricate, protect, clean and maintain equipment, tools and household items. It currently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for WD-40’s current fiscal-year earnings and revenues implies growth of 7.2% and 9.9%, respectively, from the year-ago actuals. WDFC delivered a trailing four-quarter average earnings surprise of 18.3%.

Purple Innovation designs, manufactures and sells premium sleep products, including mattresses, pillows, cushions, bed frames and bedding accessories. It also holds a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Purple Innovation’s current fiscal-year revenues implies decline of 0.4% from the year-ago actuals. PRPL delivered a trailing four-quarter average earnings surprise of 17.4%.

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