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Newell (NWL) Q4 Earnings In Line, Sales Lag; EPS View Up
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Newell Brands Inc. (NWL - Free Report) came up with fourth-quarter 2016 results, wherein adjusted earnings per share were in line with expectations while sales lagged estimates. Both the top line and bottom line improved year over year backed by gains from the recently acquired Jarden business. Further, the company raised its adjusted earnings guidance for 2017, reflecting confidence in its future prospects.
Shares of the company declined about 3% in the pre-market trading session following the mixed results. However, Newell’s shares have increased 36.9% in the past one year, significantly outperforming the Zacks categorized Consumer Products – Miscellaneous Staples industry’s growth of 5.4% in the same time frame.
Newell’s adjusted earnings of 80 cents a share in the fourth quarter were in line with the Zacks Consensus Estimate and surged 42.9% year over year. Earnings mainly gained from robust sales growth, contributions from buyouts, cost synergies associated with Jarden’s acquisition and Project Renewal savings. These were partly muted by adverse currency effects, as well as higher advertising and promotion expenses, increase in interest expense, higher amortization of intangibles and elevated shares outstanding.
On a reported basis, including one-time items, the company recorded earnings of 34 cents per share, compared with prior-year earnings of 5 cents.
Net sales jumped a substantial 165% to $4,135.9 million in the quarter, but fell short of the Zacks Consensus Estimate of $4,249 million. The stupendous increase in sales can mainly be attributed to considerable contribution from the recently acquired Jarden business.
Core sales climbed 2.5%, driven by solid performance of the Writing, Baby, Home Solutions and Outdoor Solutions businesses. All segments, except the small continuing portion of the Tools segment that is not held for sales, reported core sales growth during the quarter.
The company’s core sales as of Apr 15, 2016 include the pro forma core sales associated with the Jarden transaction as if the combination occurred on Apr 15, 2015. Core sales exclude the impact from acquisitions (except that of Jarden) until one year of their completion, divestitures, deconsolidation of Venezuelan operations, and currency movements.
Segmental Performance
Writing net sales dipped 0.8% year over year to $462.4 million, while core sales increased 4.3%. Net sales in the Tools segment declined 4.6% to $198.1 million, while core sales were below $8 million as majority of the Tools segment is held for sale. Commercial Products net sales inched up 0.9% to $208.9 million, while core sales increased 0.8%. Sales for the Home Solutions segment slumped 11.5% to $391 million, with core sales escalating 5.7%. Net sales for the Baby & Parenting segment increased 1.6% to $241.7 million, while core sales grew 3.6%.
Branded Consumables net sales were $1.10 billion, while pro forma net sales for the segment dropped 0.1% and pro forma core sales rose 2.3%. Consumer Solutions net sales were $709.7 million, while pro forma net sales decreased 0.3% and pro forma core sales rose 0.3%. Outdoor Solutions segment reported net sales of $730.6 million, with pro forma net sales rising 3.8% and pro forma core sales up 2.9%. Process Solutions segment posted net sales of $88.9 million, where pro forma net sales were down 0.6% and pro forma core sales increased 0.8%.
Margins
Newell’s normalized gross margin contracted 130 basis points (bps) to 37.2% as the pricing, synergies and productivity gains were more than offset by adverse mix effects of the Jarden acquisition and the deconsolidation of Venezuelan operations, along with negative currency headwinds.
Normalized operating income soared roughly 215.6% to $676.1 million. Normalized operating income margin improved 260 bps to 16.3%, as the company’s Project Renewal savings and synergies, more than offset the amortization expenses related to acquisitions, higher advertising and promotion expenses, and adverse currency headwinds.
Full-Year Synopsis
For 2016, the company’s adjusted earnings came in at $2.89 per share, surpassed the Zacks Consensus Estimate of $2.87 and grew 32.6% from 2015. Revenues for the year soared 124.2% to $13,264 million, while core sales grew 3.7%. The company’s top-line lagged the Zacks Consensus Estimate of $13,402 million.
Other Financial Details
Newell ended 2016 with cash and cash equivalents of $587.5 million, long-term debt of $11,290.9 million, and shareholders’ equity of $11,445.3 million. In 2016, the company generated operating cash flow of $1,828.5 million.
Outlook
Following the mixed fourth quarter, this Zacks Rank #3 (Hold) company initiated net sales forecast for 2017, alongside widening the lower end of its core sales and raising its adjusted earnings guidance outlooks.
Newell expects net sales for 2017 in the range of $14.52–$14.72 billion, reflecting a 9.5–11% growth from $13.26 billion reported in 2016. The net sales forecast is based on the timing of acquisition and divestitures, foreign currency effects and the estimated core sales growth.
The company now anticipates core sales growth in a range of 2.5%–4%, compared with growth in the range of 3–4% projected earlier. The widened guidance stems from the company’s expectations that the foot fall at U.S. retail malls will be lower. However, the company anticipates the core sales growth rate to pick up as the year proceeds as the company’s transformation pace slows down. The company anticipates core sales growth for first-quarter 2017 to be in line with fourth-quarter 2016 level.
Normalized earnings per share are now expected in the range of $2.95−$3.15, compared with $2.85–$3.05 guided earlier. The raised earnings view reflects the timing of acquisitions and divestitures, additional currency impacts and gains from lower tax rates. The company reiterated the previously stated 2017 tax rate forecast of 26–27% to hold true for most of the year, excepting a one-time low tax rate anticipated in third-quarter 2017. Consequently, the company expects a full year tax rate of nearly 23%.
Newell Brands Inc. Price, Consensus and EPS Surprise
Energizer, with a long-term EPS growth rate of 9.5%, has delivered an average positive earnings surprise of 20.5% in the past four quarters and have a VGM Style Score of “A”.
Ollie's Bargain has to its credit a spectacular earnings history as the company delivered an average positive earnings surprise of 17.6% in the past four quarters. Moreover, its long-term EPS growth rate of 18.9% and positive estimate revisions in the past 30 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 14%, flaunts a solid earnings history having delivered an average positive surprise of 10.4% in the trailing four quarters.
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Newell (NWL) Q4 Earnings In Line, Sales Lag; EPS View Up
Newell Brands Inc. (NWL - Free Report) came up with fourth-quarter 2016 results, wherein adjusted earnings per share were in line with expectations while sales lagged estimates. Both the top line and bottom line improved year over year backed by gains from the recently acquired Jarden business. Further, the company raised its adjusted earnings guidance for 2017, reflecting confidence in its future prospects.
Shares of the company declined about 3% in the pre-market trading session following the mixed results. However, Newell’s shares have increased 36.9% in the past one year, significantly outperforming the Zacks categorized Consumer Products – Miscellaneous Staples industry’s growth of 5.4% in the same time frame.
Newell’s adjusted earnings of 80 cents a share in the fourth quarter were in line with the Zacks Consensus Estimate and surged 42.9% year over year. Earnings mainly gained from robust sales growth, contributions from buyouts, cost synergies associated with Jarden’s acquisition and Project Renewal savings. These were partly muted by adverse currency effects, as well as higher advertising and promotion expenses, increase in interest expense, higher amortization of intangibles and elevated shares outstanding.
On a reported basis, including one-time items, the company recorded earnings of 34 cents per share, compared with prior-year earnings of 5 cents.
Net sales jumped a substantial 165% to $4,135.9 million in the quarter, but fell short of the Zacks Consensus Estimate of $4,249 million. The stupendous increase in sales can mainly be attributed to considerable contribution from the recently acquired Jarden business.
Core sales climbed 2.5%, driven by solid performance of the Writing, Baby, Home Solutions and Outdoor Solutions businesses. All segments, except the small continuing portion of the Tools segment that is not held for sales, reported core sales growth during the quarter.
The company’s core sales as of Apr 15, 2016 include the pro forma core sales associated with the Jarden transaction as if the combination occurred on Apr 15, 2015. Core sales exclude the impact from acquisitions (except that of Jarden) until one year of their completion, divestitures, deconsolidation of Venezuelan operations, and currency movements.
Segmental Performance
Writing net sales dipped 0.8% year over year to $462.4 million, while core sales increased 4.3%. Net sales in the Tools segment declined 4.6% to $198.1 million, while core sales were below $8 million as majority of the Tools segment is held for sale. Commercial Products net sales inched up 0.9% to $208.9 million, while core sales increased 0.8%. Sales for the Home Solutions segment slumped 11.5% to $391 million, with core sales escalating 5.7%. Net sales for the Baby & Parenting segment increased 1.6% to $241.7 million, while core sales grew 3.6%.
Branded Consumables net sales were $1.10 billion, while pro forma net sales for the segment dropped 0.1% and pro forma core sales rose 2.3%. Consumer Solutions net sales were $709.7 million, while pro forma net sales decreased 0.3% and pro forma core sales rose 0.3%. Outdoor Solutions segment reported net sales of $730.6 million, with pro forma net sales rising 3.8% and pro forma core sales up 2.9%. Process Solutions segment posted net sales of $88.9 million, where pro forma net sales were down 0.6% and pro forma core sales increased 0.8%.
Margins
Newell’s normalized gross margin contracted 130 basis points (bps) to 37.2% as the pricing, synergies and productivity gains were more than offset by adverse mix effects of the Jarden acquisition and the deconsolidation of Venezuelan operations, along with negative currency headwinds.
Normalized operating income soared roughly 215.6% to $676.1 million. Normalized operating income margin improved 260 bps to 16.3%, as the company’s Project Renewal savings and synergies, more than offset the amortization expenses related to acquisitions, higher advertising and promotion expenses, and adverse currency headwinds.
Full-Year Synopsis
For 2016, the company’s adjusted earnings came in at $2.89 per share, surpassed the Zacks Consensus Estimate of $2.87 and grew 32.6% from 2015. Revenues for the year soared 124.2% to $13,264 million, while core sales grew 3.7%. The company’s top-line lagged the Zacks Consensus Estimate of $13,402 million.
Other Financial Details
Newell ended 2016 with cash and cash equivalents of $587.5 million, long-term debt of $11,290.9 million, and shareholders’ equity of $11,445.3 million. In 2016, the company generated operating cash flow of $1,828.5 million.
Outlook
Following the mixed fourth quarter, this Zacks Rank #3 (Hold) company initiated net sales forecast for 2017, alongside widening the lower end of its core sales and raising its adjusted earnings guidance outlooks.
Newell expects net sales for 2017 in the range of $14.52–$14.72 billion, reflecting a 9.5–11% growth from $13.26 billion reported in 2016. The net sales forecast is based on the timing of acquisition and divestitures, foreign currency effects and the estimated core sales growth.
The company now anticipates core sales growth in a range of 2.5%–4%, compared with growth in the range of 3–4% projected earlier. The widened guidance stems from the company’s expectations that the foot fall at U.S. retail malls will be lower. However, the company anticipates the core sales growth rate to pick up as the year proceeds as the company’s transformation pace slows down. The company anticipates core sales growth for first-quarter 2017 to be in line with fourth-quarter 2016 level.
Normalized earnings per share are now expected in the range of $2.95−$3.15, compared with $2.85–$3.05 guided earlier. The raised earnings view reflects the timing of acquisitions and divestitures, additional currency impacts and gains from lower tax rates. The company reiterated the previously stated 2017 tax rate forecast of 26–27% to hold true for most of the year, excepting a one-time low tax rate anticipated in third-quarter 2017. Consequently, the company expects a full year tax rate of nearly 23%.
Newell Brands Inc. Price, Consensus and EPS Surprise
Newell Brands Inc. Price, Consensus and EPS Surprise | Newell Brands Inc. Quote
Stocks to Consider
Better-ranked stocks in the same industry include Energizer Holdings Inc. (ENR - Free Report) , with a Zacks Rank #1 (Strong Buy), Ollie's Bargain Outlet Holdings Inc. (OLLI - Free Report) and Blue Buffalo Pet Products Inc. (BUFF - Free Report) , both with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Energizer, with a long-term EPS growth rate of 9.5%, has delivered an average positive earnings surprise of 20.5% in the past four quarters and have a VGM Style Score of “A”.
Ollie's Bargain has to its credit a spectacular earnings history as the company delivered an average positive earnings surprise of 17.6% in the past four quarters. Moreover, its long-term EPS growth rate of 18.9% and positive estimate revisions in the past 30 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 14%, flaunts a solid earnings history having delivered an average positive surprise of 10.4% in the trailing four quarters.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>