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Can Newell's (NWL) Strategies Keep its Growth Story Intact?
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Consumer and commercial goods behemoth Newell Brands Inc. (NWL - Free Report) has been garnering investors’ attention consistently, as evident from its solid stock performance history. Notably, Newell has outperformed the Zacks categorized Consumer Products – Miscellaneous Staples industry over the past one year, with an impressive return of 14.4%, compared with just 3.7% for the latter.
So, let’s delve deeper into what’s been driving this Zacks Rank #3 (Hold) stock in an industry that is ranked among the Top 32% of all Zacks industries.
What’s Driving Newell Higher?
Newell Brands’ robust strategic plans, prudent portfolio management and impressive earnings history have been writing its growth story.
Starting with its growth endeavors, the company recently performed a strategic business review following Jarden Corp.’s buyout, and announced a host of changes to its business structure. In this regard, Newell revealed plans to transform into an operating company, from a holding company – with fresh investment plans and new ideas for its combined portfolio with Jarden. Firstly, Newell revealed intentions to make its operating structure simpler, by reducing its existing 32 business units by exactly half – thereby creating 16 operating divisions. This will also include the establishment of an all-new e-commerce unit that operates globally.
Progressing on these lines, Newell closed the sale of a major chunk of its Tools business to Stanley Black & Decker, Inc. (SWK - Free Report) last week. Also, the company recently inked deals to sell the Rubbermaid consumer storage totes business, alongside putting its Pine Mountain and Diamond brands up for sale. Additionally, Newell acquired Smith Mountain Industries, and announced plans to buy Sistema Plastics. This twin buyout will enhance Newell’s leadership footprint in three most significant categories, also termed as the Win Bigger categories that include Beverage, Home Fragrance and Food Storage.
Moving further, Newell’s Project Renewal Program remains on track, and the company, which achieved savings of nearly $395 million through first-quarter end, expects annual cost savings from this program to approach $700 million by 2017 end or 2018 beginning. Well, the company intends to use a major portion of the savings to accelerate growth by investing the same in business, while the remaining cost savings are expected to reflect in earnings.
While these factors have been enough to push Newell up the stock price chart, its shares have gained 9.4%, since it reported fourth-quarter 2016 results last month. A look at the quarterly report reveals that both top and bottom line grew year over year, with earnings also meeting our estimate. Notably, Newell has recorded positive earnings surprises in 18 out of the past 20 quarters, underscoring its splendid history.
Coming back to the fourth quarter, both top-and bottom-line gains were mainly backed by synergies from the recently acquired Jarden business. Moreover, the company initiated net sales forecast and raised its adjusted earnings outlook for 2017. The raised earnings view reflects the timing of acquisitions and divestitures and gains from lower tax rates. These factors also triggered an uptrend in the Zacks Consensus Estimate for 2017.
Also, Newell appears to be a good bet for value investors, given its incredible line up of statistics. The company, with a Value Style Score of ‘B’, has a trailing 12 months PE ratio of 17.54. This compares favorably with the broader industry and the market at large, as the PE for the industry and the S&P 500 are pegged at about 21.91 and 20.53, respectively. In fact, the current level is quite close to the lows of 16.03 reached in the last one year, suggesting it to be a good entry point. Moreover, Newell has a forward PE ratio (price relative to this year’s earnings) of just 16.11, so it is fair to say that a slightly more value-oriented path may be ahead for Newell stock in the near term too.
However, Newell Brand’s significant global presence exposes it to currency woes, and any further prevalence of these headwinds in the future is likely to hurt results. Moreover, intense competition and volatile consumer behavior remain major threats for the company, given its consumer-focused nature.
Nonetheless, we believe that the aforementioned growth drivers, combined with Newell’s commitment toward making prudent investments in areas with higher growth potential, should help it sustain its superb momentum.
Blue Buffalo has an average positive earnings surprise of 6.8% in the trailing four quarters. Also, the stock flaunts a long-term growth rate of 14%.
Energizer Holdings, with long-term earnings per share growth rate of 9.5% and boasts of a solid earnings surprise history.
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Can Newell's (NWL) Strategies Keep its Growth Story Intact?
Consumer and commercial goods behemoth Newell Brands Inc. (NWL - Free Report) has been garnering investors’ attention consistently, as evident from its solid stock performance history. Notably, Newell has outperformed the Zacks categorized Consumer Products – Miscellaneous Staples industry over the past one year, with an impressive return of 14.4%, compared with just 3.7% for the latter.
So, let’s delve deeper into what’s been driving this Zacks Rank #3 (Hold) stock in an industry that is ranked among the Top 32% of all Zacks industries.
What’s Driving Newell Higher?
Newell Brands’ robust strategic plans, prudent portfolio management and impressive earnings history have been writing its growth story.
Starting with its growth endeavors, the company recently performed a strategic business review following Jarden Corp.’s buyout, and announced a host of changes to its business structure. In this regard, Newell revealed plans to transform into an operating company, from a holding company – with fresh investment plans and new ideas for its combined portfolio with Jarden. Firstly, Newell revealed intentions to make its operating structure simpler, by reducing its existing 32 business units by exactly half – thereby creating 16 operating divisions. This will also include the establishment of an all-new e-commerce unit that operates globally.
Progressing on these lines, Newell closed the sale of a major chunk of its Tools business to Stanley Black & Decker, Inc. (SWK - Free Report) last week. Also, the company recently inked deals to sell the Rubbermaid consumer storage totes business, alongside putting its Pine Mountain and Diamond brands up for sale. Additionally, Newell acquired Smith Mountain Industries, and announced plans to buy Sistema Plastics. This twin buyout will enhance Newell’s leadership footprint in three most significant categories, also termed as the Win Bigger categories that include Beverage, Home Fragrance and Food Storage.
Moving further, Newell’s Project Renewal Program remains on track, and the company, which achieved savings of nearly $395 million through first-quarter end, expects annual cost savings from this program to approach $700 million by 2017 end or 2018 beginning. Well, the company intends to use a major portion of the savings to accelerate growth by investing the same in business, while the remaining cost savings are expected to reflect in earnings.
While these factors have been enough to push Newell up the stock price chart, its shares have gained 9.4%, since it reported fourth-quarter 2016 results last month. A look at the quarterly report reveals that both top and bottom line grew year over year, with earnings also meeting our estimate. Notably, Newell has recorded positive earnings surprises in 18 out of the past 20 quarters, underscoring its splendid history.
Coming back to the fourth quarter, both top-and bottom-line gains were mainly backed by synergies from the recently acquired Jarden business. Moreover, the company initiated net sales forecast and raised its adjusted earnings outlook for 2017. The raised earnings view reflects the timing of acquisitions and divestitures and gains from lower tax rates. These factors also triggered an uptrend in the Zacks Consensus Estimate for 2017.
Newell Brands Inc. Price and Consensus
Newell Brands Inc. Price and Consensus | Newell Brands Inc. Quote
Also, Newell appears to be a good bet for value investors, given its incredible line up of statistics. The company, with a Value Style Score of ‘B’, has a trailing 12 months PE ratio of 17.54. This compares favorably with the broader industry and the market at large, as the PE for the industry and the S&P 500 are pegged at about 21.91 and 20.53, respectively. In fact, the current level is quite close to the lows of 16.03 reached in the last one year, suggesting it to be a good entry point. Moreover, Newell has a forward PE ratio (price relative to this year’s earnings) of just 16.11, so it is fair to say that a slightly more value-oriented path may be ahead for Newell stock in the near term too.
However, Newell Brand’s significant global presence exposes it to currency woes, and any further prevalence of these headwinds in the future is likely to hurt results. Moreover, intense competition and volatile consumer behavior remain major threats for the company, given its consumer-focused nature.
Nonetheless, we believe that the aforementioned growth drivers, combined with Newell’s commitment toward making prudent investments in areas with higher growth potential, should help it sustain its superb momentum.
Stocks to Consider
Some better-ranked stocks in the same industry include Blue Buffalo Pet Products, Inc. (BUFF - Free Report) and Energizer Holdings, Inc. (ENR - Free Report) , with a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Blue Buffalo has an average positive earnings surprise of 6.8% in the trailing four quarters. Also, the stock flaunts a long-term growth rate of 14%.
Energizer Holdings, with long-term earnings per share growth rate of 9.5% and boasts of a solid earnings surprise history.
5 Trades Could Profit ""Big-League"" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>