Great Earnings Boost Helen of Troy Stock to New Heights

HELE - Great Earnings Boost Helen of Troy Stock to New Heights

It’s no secret that the consumer sector has been alive and well recently, and it’s also no secret that this is a theme I’ve been pounding the table on for a long time now.

Tech tends to grab a lot of headlines because of billion-dollar mergers and new highs, but consumer stocks are still killing it with a stealthy rally. I have raved about the resilience of consumer confidence. Wall Street calls these surveys and polls “soft data,” but those emotions are morphing into reality — otherwise known as “hard data.”

Forget what the experts are saying. People are spending money at brick-and-mortar stores. We saw this first-hand in Helen of Troy’s (NASDAQ:HELE) strong fiscal first-quarter earnings report that was released earlier this week.

Consumer Are Out in Force

HELE, a leading global consumer products company offering brands such as OXO, Honeywell, Vicks, Revlon and much more, saw a 32.6% increase on the bottom line from $1.41 a share last year to $1.87. This was well off the Street’s expectation of $1.46. Revenue was up 9% to $354.68 million, again better than the consensus at $325.49 million.

The company has been making a transition away from its traditional beauty business and into the faster-growing health, home and housewares business. And in the last two quarters, HELE has seen strong momentum in its top segments.

Revenue Momentum February Quarter May Quarter
Housewares $87.8 million (+2.1%) $117.3 million (+18.5%)
Health & Home $186.4 million (+5.3%) $163.4 million (+8.4%)
Beauty $133.8 million (-0.3%) $73.9 million (-6.2%)

Looking ahead, management reaffirmed their full-year revenue guidance of $1.485 billion – $1.510 billion but raised their expectations for earnings from $7.30-$7.55 a share to $7.45-$7.70. For fiscal 2020, the Street is looking for $8 a share while just three months ago the consensus was at $7.67.

At this point, it’s clear that management has ironed out inconsistent earnings execution, and the stock has responded as a result. HELE soared on the strong numbers, finishing the day up more than 12.5% after briefly touching a new all-time high of $119.25.

The stock was higher again the following day, although it did pull back on Tuesday on what I suspect was a bit of profit-taking. It has been holding strong since then.

HELE’s rally is yet another example of the strength we’re seeing in consumer stocks right now — over time I see it climbing toward $130 — and the fact that volume was 9X higher than usual on Monday tells me that a lot of investor interest was piqued. With the second-quarter reporting season just getting underway, we could be in for many more upside surprises in the months ahead.

I continue to watch the consumer space and see a lot of names that are deeply oversold and look compelling. Earnings season may bring some near-term volatility, but you can be sure we’ll jump on the opportunities in great American companies leading the charge over the long term.

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