Please ensure Javascript is enabled for purposes of website accessibility

Why Edgewell Personal Care Stock Jumped 27% Today

By Jeremy Bowman - Feb 10, 2020 at 6:15PM

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

The Schick parent surged on better-than-expected earnings and an announcement that it won't pursue its acquisition of Harry's.

What happened

Shares of Edgewell Personal Care (EPC -3.71%) were soaring on Monday after the Schick parent said it would give up on its bid for Harry's, the direct-to-consumer razor company, and it reported strong first-quarter earnings.

As a result, the stock was up 27.5% today.

Some shaving cream, a cannister and a razor.

Image source: Getty Images.

So what

Edgewell, which also owns a number of household staples like the Hawaiian Tropic sun protection brand and feminine products like Playtex, called off its merger with Harry's a week after the Federal Trade Commission (FTC) said it would file a lawsuit to block the deal.

In a statement, CEO Rod Little said: "We are disappointed by the FTC's decision and continue to disagree with its position. After extensive consideration and discussion, and given the inherent uncertainty of a potential trial, the required investment of resources and time and the distraction that a continuing court battle would entail, we determined that proceeding with our stand-alone strategy is the best course of action for Edgewell and our shareholders." 

Shareholders never seemed happy about the deal, in which Edgewell agreed to pay $1.37 billion in cash and stock for Harry's. The stock plunged last May when the merger was first announced.  Among other things, investors seemed to fear the increased debt Edgewell would have to take on to fund the acquisition, which was estimated in the $1 billion range. The stock also jumped last week when the FTC said it would try to block the deal, claiming that the combination would eliminate "one of the most important competitive forces in the shaving industry" in Harry's. 

Separately, in its earnings report, Edgewell said revenue fell 0.7% to $454 million, well ahead of estimates of $445.9 million, and adjusted earnings per share jumped from $0.37 to $0.55 as the company scaled back on advertising spending. That blew past expectations of just $0.29. For the full year, Edgewell guided adjusted EPS at $2.95 to $3.15, ahead of the consensus at $2.95. 

Now what

It's odd to see shareholders in such clear disagreement over an acquisition bid, and the leadership team is clearly not happy with the result of the Harry's deal. The FTC's decision was not without controversy since years earlier it had permitted Unilever to acquire Dollar Shave Club, a similar direct-to-consumer brand. It's unclear why that deal was allowed and the Harry's merger was blocked.

Edgewell stock is now up 48% since the FTC announced its decision, a clear sign that investors opposed the acquisition, but Edgewell's stand-alone strategy isn't entirely clear. 

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

Edgewell Personal Care Company Stock Quote
Edgewell Personal Care Company
EPC
$36.06 (-3.71%) $-1.39
Unilever PLC Stock Quote
Unilever PLC
UL
$44.20 (-3.62%) $-1.66

*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
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

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.