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Newell (NWL) Completes the Divestiture of USPC Business

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Newell Brands Inc.’s (NWL - Free Report) recent activity marks the completion of its Accelerated Transformation Plan, which started in January 2018. The company had divested The United States Playing Card Company ("USPC") to Cartamundi Group. The transaction includes the sale of brands like Bicycle, Aviator, Hoyle, Bee and Fournier.

The Accelerated Transformation Plan is aimed at improving market share gains, point of sale growth, innovation, e-commerce and cost-saving plans as well as restructuring the company into a global consumer product entity. The company had stated that it will divest non-core businesses that account for nearly 35% of total sales; utilize $10 billion after-tax proceeds from divestitures and free cash flow to lower debt; make share repurchase; as well as retain its investment grade rating and an annual dividend of 92 cents per share through 2019, targeting pay out ratio of 30-35%.

The plan was made to simplify Newell’s operations, which were likely to reduce the company’s number of manufacturing facilities by 66%, distribution centers by 55%, brands by 45%, number of employees by 39% as well as reduce more than 30 ERP systems to two by the end of 2019. Management will also focus on right-sizing the cost structure for anticipated smaller net sales, remove stranded corporate expenses and recover the synergies lost through the divestitures.

We note that Newell makes prudent investments in areas with high-growth potential as well as divests underperforming and non-core assets. Earlier, it concluded divestitures of Waddington; Rawlings; Goody; Pure Fishing; Jostens; Process Solutions and Rexair businesses. Proceeds from the sale of these assets have been lowering the company’s debt and strengthening balance sheet. The divestiture of underperforming assets will enable Newell to reshape its portfolio and improve operational efficiency.

However, Newell decided to retain its Mapa/Spontex and Quickie businesses on solid prospects in third-quarter 2019 conference call. These businesses, which are generating robust cash flow and operating margins, will be accounted as continuing operations in the fourth quarter and will be part of the Food and Commercial segment. The businesses are expected to be accretive to sales, operating margin, earnings per share as well as operating cash flow in 2020 and beyond.

Price Performance & Zacks Rank

In the past six months, shares of Newell have returned 24.4% against the industry’s 13.6% decline.

The stock currently carries a Zacks Rank of 2 (Buy).

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Celsius Holdings, Inc (CELH - Free Report) has delivered an average positive earnings surprise of 33.3% in the last four quarters. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

General Mills, Inc (GIS - Free Report) delivered an average positive earnings surprise of 10% in the trailing four quarters and has a Zacks Rank #2.

Lamb Weston Holdings, Inc (LW - Free Report) has a long-term earnings growth rate of 7.9% and a Zacks Rank #2.

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