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Bear of the Day: Newell Brands (NWL)

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Newell Brands (NWL - Free Report) is a leading global consumer goods company headquartered in Hoboken, NJ. Its portfolio is full of well-known brands, including Paper Mate, Sharpie, EXPO, Elmer’s, Josten’s, Oster, Sunbeam, Mr. Coffee, Graco, Calphalon, Contigo, First Alert, and Yankee Candle.

Shares of NWL have experienced a rocky stretch lately, falling almost 30% year-to-date. Mixed results in Newell’s second-quarter earnings report didn’t help things either; the stock took an 18% hit as a result.

Looking at Newell’s Q2 report a little deeper, the company managed to beat the Zacks Consensus, but revenues lagged, marking the second consecutive miss; sales declined 12.8% year-over-year due to a new revenue recognition standard and the adverse impact of last year’s divestitures.

All of Newell’s main segments saw sales declines. Food & Appliances dropped almost 12% to $621 million; Home & Outdoor Living came in at $742 million, down 6.7% from the prior-year period; and Learnings & Development generated sales of $839 million, falling over 15% year-over-year.

Newell Brands Inc. Price, Consensus and EPS Surprise

Newell Brands Inc. Price, Consensus and EPS Surprise | Newell Brands Inc. Quote

It didn’t take long for analysts to lower their own estimates for 2018, and 10 have slashed their earnings outlook in the last 60 days; our consensus has fallen $1.45 from $2.43 to 88 cents. While the consensus estimate for 2019 has dropped as well, earnings could bounce back and grow about 88%.

NWL is now a #5 (Strong Sell) on the Zacks Rank.

Going forward, there’s no doubt Newell Brands will face some tough headwinds, but the company is progressing with its Accelerated Transformation Plan.

President and Chief Executive Officer Michael Polk seems confident in the company’s business initiatives. “While the retail landscape remains difficult, consumer macros are generally good and we expect core sales on our continuing businesses to recover to growth by the fourth quarter, with margins improving as a result of strong savings programs and broad-based price increases,” he commented in the Q2 earnings release.

NWL is focused on creating a simpler, faster, and stronger consumer-focused brand portfolio, as well as restructuring itself into a company that will potentially hold a value of $9 billion. Management recently agreed to divest hair tools and accessories maker Goody Products, which is in sync with its plans to offload non-core businesses that account for almost 35% of its sales.

Additionally, management plans on focusing on right-sizing the cost structure for anticipated smaller net sales, removing stranded corporate expenses, and recovering synergies lost through the divestitures.

Investors looking for a Consumer Products stock pick to add to their portfolio should consider Ollie’s Bargain Outlet (OLLI - Free Report) . This unique retailer is a #2 (Buy) on the Zacks Rank, and currently expects over 38% earnings growth for the year.

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