We recently compiled a list of the 10 Best Home Appliance Stocks to Invest In. In this article, we are going to take a look at where Spectrum Brands Holdings, Inc. (NYSE:SPB) stands against the other home appliance stocks.
The global home appliances market, estimated by Fortune Business Insights to be worth $708.15 billion in 2023, is expected to expand at a CAGR of 6.20% from $743.56 billion in 2024 to $1,203.11 billion by 2032. In terms of market share, North America accounted for 32.51% of the home appliances market in 2023.
The market is expanding more quickly due to consumer demand for energy-efficient and technologically advanced home appliances. A Parks Associates consumer survey in 2022 shows that 38% of homes own one or more smart home devices, which represents a slight 2% rise from the previous year. In 2021, about 30% of customers bought a smart home gadget, and 44% of US households wanted to do the same in 2023. Consumer interest in the expanding array of Internet-connected gadgets, such as energy management programs and smart home security systems, is still high. The user experience is further enhanced by improved mobile integration.
Parks Associates research director Chris White pointed out how customer expectations are rising and how demand for integrated smart home experiences is expanding. Out of 10,000 houses that participated in the survey, 88% had access to the Internet, 54% had a connected health device, 40% had a security system, and 56% had a smart TV. However, concerns about security and connectivity are growing among manufacturers as more devices find their way into homes and offices.
Secondly, instead of using traditional middlemen, more and more consumers are opting to purchase directly from manufacturers of household appliances. According to PWC’s June 2023 Global Consumer Insights Pulse Survey, the majority of customers (63%) report having bought products straight from a brand’s website and anticipate this percentage to rise. Another 29% of consumers state that, while they haven’t done so yet, they are thinking about going direct-to-consumer.
Another study by J.D. Power 2023 named U.S. Appliance Satisfaction Study reveals that 75% of appliance purchases occur on the first visit to the store and that nearly three-fourths (71%) of home appliance transactions take place in-store. Even with 29% of purchases made online, the majority of consumers still prefer to see the equipment in person.
Last year Christina Cooley, home intelligence lead at J.D. Power, stated:
“This year’s data shows us that 56% of home appliance shoppers are doing their research online before heading in store to purchase,” “Though price is almost always going to be the main driver of whether someone decides to purchase an appliance or not, one-third of buyers did not purchase because they were seeking specific options and features, and one-fifth indicated they couldn’t purchase, as their desired appliance wasn’t in stock.”
According to the American Customer Satisfaction Index Household Appliance and Electronics Study of 2024, with slight drops in both product and service quality, the household appliance market—which includes washers, dryers, dishwashers, refrigerators, ranges/cooktops/ovens, and over-the-range microwaves—falls 1% to an ACSI score of 80. The only appliances that have grown year over year are dishwashers and refrigerators (both up 1% to 80), with the range/oven/cooktop category seeing the largest loss, falling 4% to 79.
Jamie Rosenberg, Associate Director – Global Household and Personal Care, stated:
“The impact of inflation on the major household appliance market is both profound and complex. Many low-income consumers are delaying upgrades, but for 54% of buyers, breakdowns are the biggest purchase driver. When that happens, demand is relatively inelastic. When we add the impact of mid- to upper-income consumers who are still unleashing pent-up demand from supply constraints over the past three years, we have a market growth rate that is well above normal. Looking ahead, connected appliance innovations that create a convergence of reduced operating costs, and enhanced performance, convenience and sustainability will drive a new wave of trading up that keeps market growth high over the next five years.”
Methodology:
We sifted through holdings of home appliance ETFs and online rankings to form an initial list of 20 home appliance stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A person enjoying the convenience of their pet products, that simplify clean-up.
Spectrum Brands Holdings, Inc. (NYSE:SPB)
Number of Hedge Fund Holders: 30
Spectrum Brands Holdings, Inc. (NYSE:SPB) is a manufacturer and distributor of consumer goods and household necessities. The Home and Garden (H&G), Global Pet Care (GPC), and Home and Personal Care (HPC) segments make up the company. The H&G division includes cleaning supplies, insect control, and home and garden businesses. The HPC section includes the market for small kitchen and personal hygiene appliances.
Home appliances under the brands Black & Decker, Russell Hobbs, George Foreman, PowerXL, Emeril Legasse, Copper Chef, Toastmaster, Juiceman, Farberware, and Breadman, as well as personal care products under the Remington brand, are offered by the Home and Personal Care section.
It produces, markets, and ships its goods to North America, Europe, Latin America, Africa, and the Middle East.
The company reported revenue of $779.4 million for the third quarter of 2024, which was 6% YoY higher than the consensus estimate of $755.33 million. CEO David Maura reports that favorable year-to-date net sales growth is the result of strong operating momentum across all divisions. From the prior year, the gross margin climbed by 310 basis points to 38.9%. Adjusted EBITDA, which excludes investment income, was $93.6 million following a $23 million investment in brand and innovation. Net income rose to $191.3 million YoY. After deducting investment income, adjusted EBITDA margins came in at 12.0%, while net income margins increased by 2.5% annually. The company now forecasts adjusted EBITDA growth of about 20% for the whole year.
Canaccord Genuity’s Brian McNamara raised the price objective to $91, although they kept his Hold rating on Spectrum Brands. The Hold rating was issued due to worries about declining margins and the requirement for continuous sales growth, despite robust Q3 sales and e-commerce growth. Even if the company’s updated adjusted EBITDA projection is positive, the analyst is still concerned about the profitability of the company going forward.
Despite this, Spectrum Brands Holdings, Inc. (NYSE:SPB) is a well-known player in the home appliance market and boasts a sound financial position.
Overall SPB ranks 8th on our list of the best home appliance stocks to invest in. While we acknowledge the potential of SPB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SPB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.