RBC Capital Markets believes Edgewell Personal Care, the company behind Schick razors and Banana Boat sunscreen, could look like a more dependable business by fiscal 2027. In a research note published Friday, the investment bank said the tariff-related cost pressures that weighed on fiscal 2026 results should roll off, making next year's numbers easier to compare and potentially boosting profitability.
Edgewell has missed parts of its long-term financial plan in recent periods, according to RBC. But the bank argues that fiscal 2027 could offer "cleaner" results, even if the company doesn't hit every target. The key driver: costs tied to tariffs that hit fiscal 2026 should be "lapped," meaning the year-on-year comparisons get easier once those expenses drop out of the calculation.
What's behind the optimism
Edgewell's management has laid out a financial "algorithm" that targets 2% to 3% organic sales growth—growth that excludes acquisitions and currency effects—along with 4% to 6% growth in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization, with one-time items removed) and 6% to 7% growth in adjusted earnings per share.
RBC thinks fiscal 2027 could show progress on these metrics, even if the company doesn't hit every line item. The main reason is that tariff-driven costs that weighed on fiscal 2026 should fade. When a temporary cost headwind disappears, a lower cost base allows profits to grow faster than sales, a dynamic often called "operating leverage." That can lift margins without requiring a big jump in demand.
For everyday investors, this matters because it suggests Edgewell's earnings could re-accelerate even if revenue growth stays modest. A company that can grow profits faster than sales often becomes more attractive to the market, especially if the improvement looks sustainable.
A credibility test for management
RBC framed the situation as a credibility test. After a period of missed targets, investors are likely to remain cautious until management proves it can set achievable goals and deliver on them. If Edgewell can guide conservatively and then hit those numbers, the market may be more willing to value the business on its forward earnings power rather than its recent stumbles.
This is a common pattern in markets. When a company has a track record of missing its own forecasts, investors typically apply a "discount" to its valuation. That discount only shrinks when the company demonstrates consistent execution. A single good quarter usually isn't enough; the market wants to see a pattern.
RBC's $35 price target for Edgewell depends on fiscal 2027 feeling more repeatable than the current share price of $28.26 implies. In other words, the bank is betting that the company can convince investors its improved performance is not a one-off.
What it means for investors
For those watching Edgewell, the key watchpoint for 2027 isn't just whether tariff costs ease. It's whether margin and earnings momentum shows up consistently enough to support a higher valuation. If the company can lap those costs and still hit its growth targets, the stock could re-rate higher. But if it stumbles again, the discount may persist.
Investors should also keep an eye on the broader consumer goods sector, where companies are dealing with similar cost pressures. Tariffs have been a recurring theme for many firms that rely on imported materials or finished goods. As those pressures fade, other companies could see similar margin tailwinds.
For context, other consumer-focused firms have faced comparable challenges. For instance, Publicis recently beat forecasts and maintained its growth outlook, showing that some companies are managing to navigate cost pressures. Meanwhile, Wise raised its growth outlook on strong volumes, a reminder that demand strength can offset cost headwinds.
But Edgewell's situation is unique because the tariff impact is expected to roll off, creating a natural tailwind. That could make fiscal 2027 a pivotal year for the company's credibility with investors.
As always, no investment decision should be based solely on one analyst's view. But understanding the mechanics of operating leverage and the importance of consistent execution can help investors evaluate whether a company like Edgewell is on a more stable footing.
