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Newell Brands (NWL) Up 6.6% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Newell Brands Inc. (NWL - Free Report) . Shares have added about 6.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Newell Q4 Earnings In Line, Sales Lag; EPS View Up
Newell Brands’ adjusted earnings of $0.80 a share in fourth-quarter 2016 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 $0.34 per share, compared with prior-year earnings of $0.05.
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 massive 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, the 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%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions higher for the current quarter compared to five lower.
At this time, Newell Brands' stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'B'. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
While estimates have been trending downward for the stock, the magnitude of these revisions has been net zero. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Newell Brands (NWL) Up 6.6% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Newell Brands Inc. (NWL - Free Report) . Shares have added about 6.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Newell Q4 Earnings In Line, Sales Lag; EPS View Up
Newell Brands’ adjusted earnings of $0.80 a share in fourth-quarter 2016 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 $0.34 per share, compared with prior-year earnings of $0.05.
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 massive 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, the 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%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions higher for the current quarter compared to five lower.
Newell Brands Inc. Price and Consensus
Newell Brands Inc. Price and Consensus | Newell Brands Inc. Quote
VGM Scores
At this time, Newell Brands' stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'B'. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
While estimates have been trending downward for the stock, the magnitude of these revisions has been net zero. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.