Helen of Troy beat on earnings but grew sales only 2.1% in Q2.
Tariff refunds were key to the earnings beat.
Helen of Troy stock trades below 5x likely free cash flow this year.
Cosmetics company Helen of Troy (NASDAQ:HELE) stock jumped 25% in early trading Thursday after crushing earnings this morning. The stock did miss on sales, however, and as the trading day progressed, Helen's gain was cut to 7.2% as of 11 a.m. ET.
Analysts expected Helen to earn $0.51 per share on $443.2 million in sales for fiscal Q2 2027. Actual earnings were $0.79, and sales came in at $440.9 million.
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How did Helen of Troy deliver its earnings beat? In one word: Tariffs. And in two words: Tariff refunds.
Helen grew its sales only 2.1% in Q2, but its operating profit margin flipped from deeply negative a year ago, to 5.2% this time around. Net losses of $13.44 a year ago likewise flipped as money came flooding back into the company from tariff refunds. Still, when calculated under generally accepted accounting principles (GAAP), Helen's net profit was only $0.19 per share.
The "$0.79" per-share profit, it turns out, was only a pro forma number and unlikely to repeat.
So what can investors expect from Helen of Troy stock going forward? Turning to guidance, Helen narrowed its sales forecast for fiscal 2027 to a range from $1.77 billion to $1.82 billion. That works out to sales guidance of about 1% growth at the midpoint.
Helen does expect to remain profitable this year -- $3.63 to $4.26 per share, GAAP, with pro forma profits a bit lower. Best of all, free cash flow will be positive -- about $130 million for the year.
For a $640 million market-cap stock, that works out to a price-to-free cash flow ratio of less than 5x. Despite the static from the tariff refunds, that seems pretty cheap to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.