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Newell Brands (NWL) in Investors’ Good Books: Here’s Why


Newell Brands Inc. NWL looks good driven by its transformation goals, cost-saving programs, shareholder-friendly moves and value-added investments. One major component of Newell’s Growth Game Plan is portfolio management, which is likely to accelerate growth by simplifying and strengthening the company’s portfolio.

The cumulative effect of these strategies and actions is well reflected in the company’s Zacks Rank #2 (Buy) and a Value Score of B. Further, the company’s long-term earnings growth rate of 8.8% highlights its inherent strength.

Newell Poised for Growth on Solid Brand Portfolio

Newell Brands is a leading name in the home and office products space backed by its solid portfolio of brands including Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Graco, Calphalon and Goody. Also, the addition of popular brands like Mr. Coffee machines and Rawlings baseballs after the Jarden acquisition positions it well for future growth.

Portfolio Management: A Powerful Tool

The company’s Growth Game Plan not only focuses on simplification of operating structure but also makes prudent investments in higher growth potential areas. As a part of this plan, Newell Brands significantly strengthened its portfolio by completing six acquisitions and divestitures in and just after the end of first-quarter 2017. Acquisitions included the Sistema food storage and the WoodWick fragranced candles businesses while divestitures comprised the tools, consumer storage totes, fire building and fire starting, and the rope and chain business.

Additionally, Newell Brands recently divested its central European baby gear business, Teutonia. The company is also on track with its plan of exiting product lines having an annual sale of $200-$300 million across its combined business with Jarden, over the next two to three years.

Cost Savings and Investments

Newell remains on track with its Project Renewal Program, which is expected to generate annual cost savings of $700 million by 2017-end or 2018 beginning. The company is currently in the third phase of the plan that focuses on generating cost savings in the areas of procurement. This is to be achieved by reducing complexity of its business and simplifying the manufacturing and distribution processes as well as further overhead reduction.

Moreover, the company plans to use a major portion of the savings to accelerate growth by reinvesting in its business while the remaining cost savings are expected to reflect in earnings. The company is poised to generate more than $300 million savings in the year. Also, Newell obtained cost synergies as anticipated with an additional $86 million in the third quarter.

Balance Sheet Looks Strong

Newell Brands’ financial flexibility enables it to enhance shareholder values and drive future development through value-added investments aimed at accelerating growth and expanding margins. Further, the company’s commitment toward enhancing shareholder value is evident from its robust dividend payment history and share repurchase programs.

Thus, the company anticipates growing dividend at par with earnings. Additionally, it approved a new share buyback plan of up to $1 billion, expiring by 2020-end.The company also has $256 million remaining under its current buyback plan, which is now extended til 2020.

Bottom Line

While all seems well with this company, the recent effects of the Hurricane Harvey on its results and strained margins cannot be ignored. Also, the company’s lowered outlook for 2017 indicates troubles for the company in the near-term. Consequently, the stock has plunged 26.1% in the past three months wider than the industry’s decline of 3.4%.

Though these troubles seem temporary and are slated to impact near-term performance, we believe the company is well poised for growth in the longer term driven by the aforementioned strategies and cost saving initiatives.

Do Consumer Products Stocks Grab Your Attention? Check These

Interested investors may consider Ollie’s Bargain Outlet Holdings Inc. OLLI, Energizer Holdings Inc. ENR and Kimberly-Clark Corp. KMB. While Ollie’s Bargain flaunts a Zacks Rank #1 (Strong Buy), Energizer Holdings and Kimberly-Clark carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie’s Bargain delivered an average positive earnings surprise of 9.5% in the trailing four quarters. It has a long-term earnings growth rate of 20.6%

Energizer Holdings posted an average positive earnings surprise of 24% in the trailing four quarters. In addition, it has a long-term earnings growth rate of 7.2%.

Kimberly-Clark delivered an average positive earnings surprise of 1.2% in the trailing four quarters. It has a long-term earnings growth rate of 6.2%.

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