Prestige Brands Holdings, Inc. (PBH) is weathering the economic storm with its strong brands such as Comet and Little Remedies. Net income for the second quarter grew 25% from a year ago. PBH is trading at 9.8x forward earnings.

Company Description

Prestige Brands distributes over-the-counter healthcare, personal care and household products throughout the world. For 75 years, the company has been marketing Spic and Span products and also distributes famous brands including Compound W wart treatment, Chloraseptic sore throat products, Cutex nail polish remover and Little Remedies pediatric over-the-counter healthcare products.

Second Quarter Net Income Jumped 25%

On Nov 6, Prestige Brands reported second-quarter 2009 earnings that matched Wall Street estimates. Net income rose 25% to $8.5 million, or 17 cents, from $6.8 million, or 14 cents per share in the year ago period.

Revenues were up 1% to $88.1 million from $87.3 million in the second quarter of fiscal 2008. The gain was due primarily to increases in sales in the Clear Eyes, Comet and Little Remedies brands. The company also introduced 2 new products that sold well: Chloraseptic Allergen Block and Little Allergies Allergen Block.

Several brands lost ground in the quarter, including Murine Ear, Compound W and Wartner.

The company continued to pay down debt. It used cash flow for debt repayment of $11 million during the second quarter, reducing the total debt to $385.2 million as of Sep 30.

But given the credit crisis, the company said it would use its future cash flow to build its cash reserve to approximately $30 million and intends to reduce debt only modestly during that period until the cash level is achieved.

Looking forward, Prestige Brands expects improved organic growth in the second half of fiscal 2009 due to the investments it has made in the prior quarters.

Consensus Estimates Rise for the Third Quarter and Fiscal 2009

Covering analysts are optimistic about Prestige Brands’ 2009 outlook. Third-quarter estimates are up 1 cent to 20 cents in the last 60 days. For fiscal 2009, estimates are also 1 cent higher at 75 cents per share.

Value Fundamentals

Prestige Brands is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 2 out of the last 4 quarters by an average of 3.88%.

PBH is trading at only 9.8x forward earnings. The company has a price-to-book of 0.80.

Content Courtesy: Zacks Investment Research

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