Earnings Preview: Newell Rubbermaid

Global manufacturer and marketer of consumer and commercial products, Newell Rubbermaid Inc. (NWL - Analyst Report) will be reporting its fourth-quarter and fiscal 2011 earnings on Friday, January 27, 2012.

The current Zacks Consensus earnings per share (EPS) estimate is 38 cents, representing an annualized growth of 11.27%. The Zacks Consensus Estimate for full-year 2011 stands at $1.57 per share, indicating a year-over-year growth of 3.34% and falling within the company’s guidance range of $1.55 to $1.62 per share.

Looking at surprises, Newell has displayed positive surprises over the trailing four quarters, with earnings per share outperforming the Zacks Consensus Estimate for the past four quarters. The company’s average earnings surprise for the trailing four quarters remained at 7.51%.

Third-Quarter 2011 Recap

On October 28, 2011, Newell logged an increase in third-quarter adjusted earnings of 7.1% to 45 cents a share from 42 cents a share in the year-ago quarter. Quarterly earnings also outpaced the Zacks Consensus Estimate of 43 cents a share.

The outperformance was driven by an increase in sales volumes coupled with lower interest expenses and structural selling, general and administrative expenses, partially offset by higher input cost inflation and higher strategic selling, general & administrative (SG&A) expenses.

During the quarter, Newell recorded a growth of 5.8% year over year in net sales to $1,549.9 million. Core sales of the company contributed 3.3% while favorable foreign currency translation contributed 2.5% to net sales growth. However, net sales missed the Zacks Consensus Estimate of $1,561.0 million.

Agreement and Magnitude of Estimate Revisions  

Of the 12 analysts following the stock, one analyst revised its fourth quarter estimate downward in the last 7 and 30 days. Despite one downward revision the estimate for the fourth quarter remained the stable at 38 cents per share. None of the analysts revisited their estimates for fiscal 2011 in the last 7 or 30 days, thereby keeping the Zacks Consensus Estimate unchanged at $1.57 per share.

For fiscal 2012, one analyst revised its estimates upward while three analysts pulled down estimates in the last 30 days. In the last 7 days, two analysts slashed its 2012 estimate with no upward revisions. These upward and downward movements have pulled the Zacks Consensus 2012 Estimate down by 1 cent for both 7 and 30 day periods to $1.68 per share.

Our Take

We believe Newell stands to gain from its restructuring projects like the recently completed 'Project Accelerate,' which was aimed at improving productivity, reducing overheads, streamlining distribution and transportation processes, while exiting low-margin product categories. The completion of this program should enable the company to save in excess of $200 million annually, and in turn, boosting its productivity and bottom line.

Another project, known as the 'European Transformation Plan,' is expected to facilitate integration of certain operating activities, leverage the benefits of scale and contribute for an effective implementation of enterprise resource planning program in the region and is scheduled for completion in 2012.

The company aims to revamp its European organizational structure and processes through this project. The company expects to realize annual savings of $50 to $60 million from the plan.

Newell Rubbermaid, a leading manufacturer of home and office products in the U.S., possesses a strong portfolio of widely popular brands, such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. Leveraging its strong brand equity, Newell Rubbermaid expects modest earnings going ahead, provided the market scenario improves.

The company faces intense competition from numerous manufacturers and distributors of consumer and commercial products, such as Cooper Industries plc (CBE - Analyst Report) and Avery Dennison Corporation (AVY - Analyst Report).

Newell Rubbermaid currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock. The company retains a long-term Neutral recommendation.

Read the full analyst report on NWL

Read the full analyst report on AVY

Read the full analyst report on CBE