Helen of Troy Limited - Value

Helen of Troy Limited (HELE) is more than just hair care products as its household products segment, including the very popular OXO brand of measuring cups and cooking tools, saw record revenue in the fiscal second quarter. Helen of Troy has attractive valuations, trading at just 10.8x forward estimates which is well under its peers at 19x.

Helen of Troy is best known for its hair dryers, curling irons, brushes, hair accessories, mirrors, hair styling products and skin care products under the licensed names Vidal Sassoon, Revlon, Dr. Scholl's, Sunbeam and its own brands of Final Net and Condition 3-in-1, among others.

But it also manufactures popular home products including kitchen tools, cutlery, tea kettles, trash cans, gardening tools, barbeque tools and kitchen mitts under the brands OXO and Good Grips.

Helen of Troy Acquires Kaz, Inc.

On Dec 9, Helen of Troy expanded its stable of brand names by acquiring Kaz, Inc. for $260 million in cash. Kaz provides health care and home environment solutions under the brand names Vicks and Braun, as well as Honeywell and Stinger.

Its products include vaporizers, humidifiers, blood pressure monitors, air purifiers, heaters and fans. Sales are in the United States and worldwide.

The deal is expected to close by the end December 2010 and is expected to be accretive to earnings in the fiscal year ending Feb 29, 2012.

Helen of Troy Reports Record Sales in the Fiscal Second Quarter

On Oct 6, Helen of Troy reported fiscal second quarter results and beat the Zacks Consensus for the 4th straight quarter. Earnings per share were 75 cents compared to the consensus of 64 cents. It made just 51 cents in the year ago quarter.

Sales jumped 7.8% to $174.8 million from $162.1 million a year ago. For 6 months, sales rose 9.4% to $334 million from $306 million. Housewares led the way in the second quarter, rising 10.2% to $55.7 million while the personal care segment jumped 6.7% to $119.1 million.

Helen of Troy still sees a challenging worldwide retail environment, but is seeing organic growth in the Housewares Segment, especially in OXO brands.

Outlook for the Third Quarter

The third quarter should be more challenging for Helen of Troy due to increasing inbound freight and commodity costs. It expects earnings to decline compared to the year ago quarter.

However, it expects the full year earnings range to be $2.70 to $2.80 per share.

Zacks Consensus Estimates Mixed

The stock declined on the guidance news but since the acquisition was announced in early December, shares have surged to a 2-year high.

Estimates have been mixed for fiscal 2011 over the last 30 days with 1 rising and 1 falling in that time. The fiscal 2011 Zacks Consensus has risen by 3 cents to $2.77 from $2.74, but had been at $2.82 per share the week before.

Still, this is earnings growth of 19.4%.

Fiscal 2012 is looking up. 2 estimates have moved higher in the past month, pushing the Zacks Consensus up to $3.21 from $3.00. That is continued earnings growth of 15.8%.

Helen of Troy is expected to report third quarter results on Jan 11, 2011.

Helen of Troy is a Value Stock

Helen of Troy is cheaper than its nearest competitors in the houseware space. Lifetime Brands (LCUT) has a forward P/E of 12.2 which is more expensive than Helen of Troy.

Helen of Troy also has a price-to-book ratio of 1.5, which is within the value parameters. Lifetime Brands has a similar P/B ratio.

Additionally, the company has a solid return on equity (ROE) of 14%, well above its peers at 9.5%.

Helen of Troy is a a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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