Why Prestige Brands Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Prestige Brands Holdings (NYSE: PBH  ) were looking less prestigious today, falling as much as 10% after a disappointing earnings report.

So what: The maker of drugstore products, including Clear Eyes, Spic and Span, and Comet, actually beat earnings estimates by $0.01, posting a per-share profit of $0.36, but revenues missed the mark. Sales grew 15.3%, to $154.5 million, short of expectations at $156.6 million, even as core over-the-counter products grew by 9.3%, well ahead of the general category. The bulk of the remaining revenue growth came from last year's acquisition of Glaxo Smith Kline brands, which grew more slowly than expected.

Now what: This was far from a terrible report, but revenue misses can often forecast problems ahead. Now that the GSK acquisition has been fully lapped, sales  growth will slow down, and analysts are expecting top-line growth of 1%. That may be a low bar for Prestige to clear, based on recent core sales growth. If the consumer-products maker can keep up the pace we saw last quarter, the stock could bounce back in no time.

Want more on Prestige Brands? Add the company to your Watchlist by clicking right here.


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