Sector Watch: Personal-care products
Consumer products companies face real challenges during times when consumer spending is soft, but Helen of Troy Limited (Nasdaq:HELE) and National Presto Industries (NYSE:NPK) are weathering the current storm far better than most.
Helen of Troy Limited produces personal care products such as hair dryers, curling irons, shavers, hair accessories and skin care products under well-known brand names such as Vidal Sasson, Revlon, Sunbeam, Pro Touch and Salon Creations. The company added housewares to its product line in 2004 by acquiring OXO International, a manufacturer of kitchen tools and cutlery. HELE’s houseware sales grew nearly 20% last year and offset slower growth in the personal-care products segment. While only about a quarter of the size of its personal-care business, the housewares division contributed 43% of HELE’s 2008 operating income.
The company markets its products through mass merchandisers, drug chains, groceries and specialty stores. Product line extensions were a major driver of earnings growth last year, with FY 2008 per-share earnings improving 22% to $1.93 from $1.58. HELE introduced 526 new products in 2008 and has an additional 389 new products in its 2009 development pipeline.
The company surprised analysts in the first quarter of FY 2009 by reporting non-GAAP per-share earnings of $0.42, up 31% from last year’s first quarter and 40% above analyst estimates. This marked HELE’s third-consecutive quarter of positive earnings surprises. In addition to new products, the company expects to fuel future earnings growth with expense reductions and possibly an acquisition. Analysts target 10% annual long-term growth for HELE. These shares are reasonably priced compared with other consumer product companies at a 13 times P/E multiple and an 11 times forward P/E multiple. My $30 price target for Helen of Troy shares is 30% above . . .
Helen of Troy Limited produces personal care products such as hair dryers, curling irons, shavers, hair accessories and skin care products under well-known brand names such as Vidal Sasson, Revlon, Sunbeam, Pro Touch and Salon Creations. The company added housewares to its product line in 2004 by acquiring OXO International, a manufacturer of kitchen tools and cutlery. HELE’s houseware sales grew nearly 20% last year and offset slower growth in the personal-care products segment. While only about a quarter of the size of its personal-care business, the housewares division contributed 43% of HELE’s 2008 operating income.
The company markets its products through mass merchandisers, drug chains, groceries and specialty stores. Product line extensions were a major driver of earnings growth last year, with FY 2008 per-share earnings improving 22% to $1.93 from $1.58. HELE introduced 526 new products in 2008 and has an additional 389 new products in its 2009 development pipeline.
The company surprised analysts in the first quarter of FY 2009 by reporting non-GAAP per-share earnings of $0.42, up 31% from last year’s first quarter and 40% above analyst estimates. This marked HELE’s third-consecutive quarter of positive earnings surprises. In addition to new products, the company expects to fuel future earnings growth with expense reductions and possibly an acquisition. Analysts target 10% annual long-term growth for HELE. These shares are reasonably priced compared with other consumer product companies at a 13 times P/E multiple and an 11 times forward P/E multiple. My $30 price target for Helen of Troy shares is 30% above . . .
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About the Author
Contributing author Lisa Springer is an equity research analyst with nearly 20 years of investment research experience.