Newell Rubbermaid Inc. (NWL - Analyst Report) – the producer of Sharpie pens and Rubbermaid containers – reported second-quarter 2013 adjusted earnings per share of 50 cents, beating the Zacks Consensus Estimate of 49 cents as well as 47 cents earned in the year-ago quarter. Results benefited from better operating performances of continuing businesses and lower interest expenses.
On a reported basis, including special items, the company reported earnings of 37 cents per share, compared with 38 cents in the comparable year-ago quarter.
Top-Line and Margin Details
During the quarter, Newell’s net sales increased 3.5% to $1,474.7 million, compared with $1,425.3 million in the prior-year quarter. Core sales of the company grew 4.5%, excluding a negative impact of 100 basis points (bps) from foreign currency translation. However, the company’s top line missed the Zacks Consensus Estimate of $1,483.0 million
Newell’s quarterly gross profit rose 5.4% year over year to $582.7 million, while gross margin expanded 70 bps to 39.5%, benefiting from improved productivity, partially offset by inflation and pricing.
Adjusted operating income increased 10.9% year over year to $219.5 million, while operating margin expanded 100 bps to 14.9%. During the quarter, the company benefited from the cost savings generated by the Project Renewal initiatives and improved productivity, partially offset by enhanced brand support.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $154.1 million and long-term debt of $1,669.0 million. Shareholders’ equity was $2,037.0 million, excluding non-controlling interests of $3.5 million.
During the first six months of 2013, the company’s capital expenditures came in at $57.0 million and it utilized $59.8 million of cash for operating activities. During the said quarter, the company returned $43.6 million to shareholders through dividend payouts and the repurchase of 1.45 million shares for $38.6 million.
Fiscal 2013 Guidance
Buoyed by better-than-expected quarterly results, the company raised its lower-end earnings guidance for fiscal 2013. Management now anticipates adjusted earnings in the range of $1.80–$1.84 per share, compared with $1.78–$1.84 forecasted earlier.
Further, Newell reiterates its core sales growth, normalized operating margin and operating cash flow guidance for fiscal 2013. The company still expects core sales growth of 2%–4% and an improvement of up to 20 bps in the operating margin during fiscal 2013. Further, Newell expects to generate operating cash flow in the range of $575–$625 million in fiscal 2013, with planned capital expenditures between $150 million and $175 million.
Moreover, this Zacks Rank #2 (Buy) company expects to achieve its targeted annualized cost savings of $270–$325 million by the second quarter of fiscal 2015 through its Project Renewal program.
The initiative will be funded by savings through a reduction in structural selling as well as general and administrative expenses. The Project Renewal scheme will enable the company to reduce the complexities of the organization, while increasing investments in the most important growth areas within the business.
Other Stocks to Consider
Other stocks that are worth considering this earnings season include Big 5 Sporting Goods Corp. (BGFV - Analyst Report), Dean Foods Co. (DF - Analyst Report) and Nordstrom Inc. (JWN - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).