When I saw that consumer goods company Spectrum Brands (NYSE:SPC) was updating earnings guidance, I expected a strong outlook for its Rayovac battery business, which accounted for 30% of total sales in the recently completed quarter. It's hurricane season, Katrina has made a power mess, and battery sales must be booming. Right?

Wrong. According to the company, the "slick uptick" expected from battery and flashlight sales in hurricane-affected areas won't offset lower-than-expected sales in Europe and high inventory levels in North America.

Spectrum lowered earnings guidance for the upcoming quarter to between $0.02 and $0.05 per diluted share on a GAAP basis, or $0.10 to $0.15 per diluted share on a pro forma basis. That's sharply below the $0.36 analysts were expecting. Besides the darkening outlook on batteries, there was a "weak end" (you can thank the company for that pun) to the lawn and garden season, especially for insect repellants, and declining sales growth in its global pet supplies.

Spectrum did its best to put a pretty bow on this press release by noting that 2006 GAAP diluted earnings should come in at $2.20 to $2.35 a share, or $2.50 to $2.65 on a pro forma basis.

When considering this stock, contemplate Foolish writer Alyce Lomax's observation that Spectrum might be an excellent example of "deworseification" -- a company that loses focus in its quest to jumpstart growth through diversification. Just this year, the company has spent $1.5 billion to buy United Industries, whose products cover the currently troubled areas of lawn and garden, insect control, and pet supplies, and $550 million for Tetra Holding, a fish food and supply company.

Spectrum's sales are highly concentrated. In 2004, Wal-Mart (NYSE:WMT) represented 18% of total sales. Home Depot (NYSE:HD), Lowe's (NYSE:LOW), Target (NYSE:TGT), and PetSmart are all mentioned in the company's annual SEC filing as significant sales contributors, and the company faces stiff competition for shelf space at those outlets. Among others, Gillette (NYSE:G), soon to be part of Procter & Gamble (NYSE:PG), competes with the company with its Duracell batteries and Braun shavers.

In addition, Spectrum Brands has bulked up on debt. Net debt (total debt minus cash) now stands at $2.3 billion, while the company's debt-to-equity ratio is a whopping 276%. Still, Spectrum has reasonably strong 12.8% trailing operating margins and generates more than enough cash to pay its interest payments -- for now. (Interest coverage has fluctuated over the past few years.)

The company's diversification efforts don't appear to be paying off, and operating results seem like they'll be less than stellar going forward. However, Spectrum's stock fell 13.3% yesterday to trade near its 52-week low. At 11.5 times 2006 guidance, the stock looks cheap. Whether or not it's truly a bargain is up to you.

Home Depot is a Motley Fool Inside Value recommendation, while PetSmart is a Motley Fool Stock Advisor pick. Whether you're a deep value investor or a risk-taking Rule Breaker, the Fool has a newsletter for you.

Fool contributor W.D. Crotty own shares in Home Depot but holds no financial position in any of the other companies mentioned. W.D. is a Tetra fish food user but prefers to face Florida's mosquitoes without the benefit of Cutter insect repellant. Click here to see The Motley Fool's disclosure policy.