Consumer goods company Helen of Troy Limited (NASDAQ: HELE), reported an increase in the fiscal 2017 first-quarter revenue and non-GAAP earnings, compared to the similar period of fiscal 2016. The company, which owns famous brands such as OXO, Vicks (behind the ear thermometer), and Stinger, missed the revenue estimate of analysts. The mixed results ensured that the share price remains range-bound between $99 and $102. We believe that the scenario cannot continue for long and the share price would soon undergo further correction because of the reasons mentioned below.
The El Paso, Texas-based company reported a marginal rise in the fiscal 2017 first-quarter revenue to $347.94 million, from $345.35 million in the first quarter of 2016. The reported revenue was below the analysts’ estimate of $356.2 million.
The Housewares segment revenue increased by 29.8% y-o-y to $84.60 million. The Health and Home segment revenue was $146.36 million, up 2.3% on a y-o-y basis. However, most of these gains were negated by 8.9% and 17% y-o-y decline in the revenue in the other two segments – Nutritional Supplements and Beauty. Acknowledging the difficulties faced by the company, Chief Executive Julien Mininberg stated that “Retail headwinds and macroeconomic uncertainties have intensified in certain segments of our business.”
For the quarter ended May 2016, the owner of Honeywell brand air purifier reported GAAP earnings of $19.03 million or $0.68 per share, against $20.41 million or $0.70 per share in the year-ago corresponding period. Excluding other items, which include patent litigation and impairment charges, the non-GAAP earnings for Q1 was $35.88 million or $1.27 per share, up from $30.70 million or $1.06 per share in Q1 2016. The first-quarter non-GAAP earnings also surpassed the Wall Street estimates of $1.11 per share.
Considering the tough business environment, the management only reaffirmed the fiscal 2017 revenue outlook. Helen of Troy anticipates FY 2017 revenue to range between $1.57 billion and $1.62 billion. This implies only a revenue growth in the range of 1.6% to 4.8%.
Helen of Troy slashed its fiscal 2017 GAAP earnings to a range of $4.37 to $4.77 per share, from the prior earning guidance in the range of $4.60 to $5.00 per share. The company also reinstated its non-GAAP earnings forecast range of $5.85 to $6.35 per share. There is no doubt that the company is doing well financially. However, it is also facing headwinds in its core business segments. Thus, in the second quarter, we can expect only mixed results similar to what we saw this time. This means that there is a negligible chance of an uptrend in the share price.
The stock faces heavy resistance at 104. Minor support exists at 95, while major support exists at 84. The stochastic indicator has made a bearish crossover below the 50 level, thereby indicating weakness in the counter.
Thus, picking up a one-touch put option would be the most effective under the current circumstances. A strike price of $95 or higher can be chosen for the trade. Finally, the trader should look for a one-month contract expiry period.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
