Energizer Holdings' (NYSE:ENR) is "one of the most compelling buys in the consumer-products sector," says Barron's. Shares have fallen about 20% since October, to $94, as Energizer shouldered debt-carrying costs from its recent acquisition of Playtex alongside higher material prices. Increased competition also slowed Q1 sales in its core businesses of shaving supplies and batteries. Still, household products revenue rose 9% in Q1 to $789.8 million, while personal care products revenue—mainly from Playtex, rose 70% to $400M. Analysts see Playtex adding $700M in sales, helping Energizer reduce its dependency on shaving products and batteries. They also see higher gross margins through huge savings as the two companies synergize.
Energizer's cash flow should help pay down the $1.5B of Playtex acquisition debt, although share buybacks will necessarily slow in the near term. Competition should ease, Zinc (for batteries) prices are trending down and innovative new products are grabbing market share. A weaker dollar also helps its growing overseas sales. ENR's price ratio of 16 times 2008 earnings trails a P/E of 19 for rivals Proctor & Gamble (NYSE:PG), Clorox (NYSE:CLX) and Church & Dwight (NYSE:CHD), even though Energizer's growth rate is higher. Bulls see a 30% upside to $125, or even $135/share in a buyout.