- UBS initiates coverage of Spectrum Brands (NYSE:SPB) with a Buy rating.
- Analyst Peter Grom says Spectrum has fully implemented the Staples Flywheel and notes an emphasis on cost cutting, reinvestment, and innovation are beginning to drive stronger earnings performance.
- "Beyond internal drivers, SPB's portfolio sits at a unique intersection of categories that have seen outsized demand from COVID," he notes.
- Consensus earnings marks on Spectrum Brands are seen as achievable.
- Looking ahead, de-urbanization and flexible work are expected to continue to drive outsized end-market growth for Spectrum vs. pre-pandemic levels. UBS is confident in SPB's growth algorithm for mid single-digit organic revenue growth over the long-term.
- The firm assigns a price target of $102 price target to rep 23% upside from current levels. That PT is based on ~9.2X EV/EBITDA estimate and is a blend of Spectrum's historical valuation relative to SMID-HPC peers and other levered staples.
- Spectrum Brands has the second highest Seeking Alpha Quant Rating in the household products sector.