Energizer beats earnings as debt reduction offsets margin pressure
Battery maker reaffirms full-year guidance after 19% EPS surprise despite organic sales decline
Energizer Holdings delivered a stronger-than-expected first quarter performance, beating earnings estimates by 19.1% while reaffirming its full-year financial guidance despite challenging market conditions. The battery maker's shares rose 1.8% on Wednesday following the announcement, which highlighted the company's ability to generate substantial cash flow and reduce debt even as it navigates margin compression and declining organic sales.
The St. Louis-based company reported fiscal first quarter revenue of $778.9 million, a 6.5% increase from the prior year and 8.5% above analyst estimates of $712.8 million. Adjusted earnings per share of $0.31 comfortably surpassed the consensus forecast of $0.26, according to earnings data compiled by MarketBeat.
Perhaps most notably, Energizer generated $124.2 million in free cash flow, representing 15.9% of quarterly sales, and reduced debt by more than $100 million during the period. The cash generation demonstrates operational resilience despite headwinds that included a 4.3% decline in organic sales and a 510 basis point contraction in gross margins to 34.9%.
The company reaffirmed its fiscal 2026 guidance, projecting adjusted earnings per share of $3.30 to $3.60 and adjusted EBITDA between $580 million and $610 million. The maintained outlook signals management confidence that ongoing strategic initiatives, including expansion in Europe and focus on high-margin lithium batteries, will offset near-term pressure.
"Energizer is actively growing its battery market share in the U.S. and pursuing strategic initiatives such as expanding its presence in Europe and focusing on high-margin lithium batteries," according to market analysis by Investing.com. The company's online search interest has consistently outpaced competitors Duracell and Rayovac over the past year, according to Google Trends data. The alkaline battery market is projected to grow from $7.92 billion in 2025 to $10.18 billion by 2032, representing a compound annual growth rate of 3.66%.
Analyst sentiment remains mixed. Barclays raised its price target to $22 from $21 while maintaining an Equal Weight rating, whereas UBS lowered its target to $19 from $26, keeping a Neutral rating. The broader analyst consensus sits at a Hold rating with five firms recommending Hold and two at Buy, according to pre-earnings coverage. The average price target stands at $26.29, suggesting room for upside from current levels around $23.38.
Energizer's valuation metrics may attract value-oriented investors. The stock trades at 6.9 times trailing earnings and 6.5 times forward estimates, well below many consumer products peers. The company also offers a 5.3% dividend yield and has paid down more than $100 million in debt this quarter. Shares remain below their 200-day moving average of $23.45 but above the 50-day line at $19.83, having recovered from a 52-week low of $16.77 reached last year.
Looking ahead, investors will focus on Energizer's ability to stabilize margins and resume organic sales growth. The battery maker's heavy debt load and leverage concerns have weighed on the stock, with UBS citing these factors in its recent downgrade. However, the company's substantial free cash flow generation and commitment to debt reduction demonstrate financial discipline that could support the stock if sustained. With the global battery market expanding and sustainability initiatives driving plastic-free packaging transitions, Energizer's established brand and distribution network provide advantages in a competitive landscape dominated by the Energizer and Duracell brands.