Please ensure Javascript is enabled for purposes of website accessibility

Why Both Energizer and Spectrum Brands Shares Fell 24% Last Month

By Anders Bylund - Updated Dec 10, 2018 at 11:26PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Spectrum is selling yet another business unit to the battery giant -- and shareholders on both sides kind of hated that idea.

What happened

Shareholders of Spectrum Brands Holdings (SPB 2.03%) and Energizer Holdings (ENR -1.43%) had a rough November. According to data from S&P Global Market Intelligence, Spectrum shares fell 24% last month, while Energizer's stock took a 23.7% haircut. Both companies reported earnings, but the bigger catalyst was found in a second deal that will transfer business units from Spectrum to Energizer.

Man cleaning the interior of a car door with a microfiber cloth.

Image source: Getty Images.

So what

The two companies have been working on a $2 billion agreement since January that shifts Spectrum's battery and portable lighting products over to Energizer. That deal was tweaked in mid-November, removing the European line of Varta-branded batteries in order to appease the local regulatory bodies. At the same time, a second agreement was inked to sell Spectrum's auto care brands -- including Armor All and STP -- to Energizer for $1.25 billion.

Both stocks fell roughly 9% on that announcement and Energizer's mixed earnings report, which beat Wall Street's earnings targets but fell short on revenue. The next week, Spectrum missed analyst targets on both the top and bottom lines to send the stock another 19% lower.

Now what

With Rayovac and Armor All under its belt, Energizer will both strengthen its own core competency and add significant scale in new markets. On the downside, these Spectrum Brands deals don't come cheap and will leave the battery giant struggling under a heavy debt load. Energizer's credit rating was downgraded in June and is under review for another cut based on the car care deal.

As for Spectrum, the company continues to reshape its business in dramatic fashion. Most of the Spectrum Brands you see today was known as HRG Group until July of this year, when that company moved from being Spectrum's largest shareholder to a fully integrated part of the same company. If and when the Energizer deals close, Spectrum will focus on pet care, lawn and garden supplies, small household appliances, and personal care products. The stock is trading at a nearly two-decade low and shareholders are desperate to find a working turnaround strategy.

So the car care deal was supposed to be good for both of these companies, but it wasn't hard to find downsides to November's events for both of them.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Spectrum Brands Holdings, Inc. Stock Quote
Spectrum Brands Holdings, Inc.
SPB
$86.91 (2.03%) $1.73
Energizer Holdings, Inc. Stock Quote
Energizer Holdings, Inc.
ENR
$30.41 (-1.43%) $0.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.