With an acquisition and some solid profits, Energizer (ENR) is sparking Wall Street's interest despite its direct battle with consumer goods giant Procter & Gamble (PG). Energizer, primarily a battery maker, also owns the Schick razor brand. It's trying to buy feminine care products maker Playtex (PYX). The merged company would compete against giant Procter & Gamble, including its huge Duracell division, in nearly every one of its product areas.
On Aug. 13, Energizer shares surged after SunTrust Robinson Humphrey analyst William Chappell upgraded the stock. Chappell outlines many reasons for his bullish outlook. For one, Energizer is gaining market share against competitors Duracell and Spectrum Brands (SPC), which makes Rayovac batteries. Schick is doing well despite new product launches from Procter & Gamble's Gillette. Based on some research-and-development expenses from late last year, Schick may be coming out with some new, exciting shaving products, Chappel says.
Plus, the analyst is optimistic about the Playtex deal. Chappell writes: "The real reason to own the stock over the next two years is the opportunity from the pending Playtex acquisition." Many are hoping Energizer, which is distributed in 150 countries, will push Playtex's products into dozens of new markets.
However, even with all the positives, there are reasons to be skeptical. Bear Stearns (BSC) analyst Peter J. Barry calls Energizer a Procter & Gamble "wannabe," and that's not a compliment. "We continue to believe that Energizer will be hard pressed to match Procter & Gamble's deep pockets and significant scale," Barry wrote last month.
