Helen of Troy Limited (HELE): Get Defensive With This Consumer Products Company

Any balanced portfolio should contain a few defensive stocks in order to balance out risk. Non-durable Consumer Products are a typically defensive industry, as these products will be needed regardless of the macro-economic situation.

While many of these companies look expensive at the moment, some are still trading at quite low multiples. Helen of Troy Limited (NASDAQ:HELE) recently came out with a quarterly beat, and is trading at a steep discount to the industry. As such, the stock looks like an enticing choice in its industry.

Introducing Helen of Troy

Helen of Troy Limited (NASDAQ:HELE) designs and distributes a range of brand-name consumer products, and has three segments: Personal Care, Housewares and Healthcare/Home Environment. The company’s offerings include products such as appliances, brushes, combs, accessories, and water filtration products. The stock has a fairly modest market cap of $1.34 billion and a surprisingly high 1.54 beta. Up over 40% in the last year, the stock has beaten the S&P 500.

Earnings history and Q1 beat

Earnings growth has been fairly impressive over the last few years, with annual Earnings Per Share (EPS) more than doubling from $1.75 in 2008 to $3.62 in fiscal 2013. Since 2010, EPS growth has easily outpaced industry peers, and annual EPS has beaten the consensus estimate every year since 2008. The company’s First Quarter (Q1) Fiscal Year (FY_ 2014 report was quite positive, with EPS of $0.82 easily beating the $0.71 consensus.

According to management, the report was a solid start to the year. Adjusted operating income rose 4.9%, and diluted EPS increased by nearly 11%. Sales growth was especially strong in the Housewares segment, with sales up 5.4%. This growth was driven mainly by strength in the company’s new OXO cleaning utility line.

The Healthcare/Home Environment segment didn’t do too badly either with a 2.6% increase in sales, water filtration products performing well. Personal Care sales declined 1.8%, as a result of weakness in grooming, skin care and hair care products, which are facing a tough retail environment. Looking forward, the company expects 2014 results largely in line with analyst expectations.

Competitors

Lifetime Brands Inc (NASDAQ:LCUT) competes with Helen of Troy Limited (NASDAQ:HELE) in the Housewares segment, but hasn’t been able to grow earnings as well in recent times. The company’s main business is branded kitchenware, which it distributes to retailers and consumers. Annual EPS has hovered between $1.24 and $1.33 since 2010, and doesn’t really seem to be increasing. The company kicked off fiscal 2013 with a fairly disastrous miss, delivering a loss of $0.05 versus a consensus estimate of a $0.12 profit.