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Bear of the Day: Newell Brands (NWL)

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Newell Brands (NWL - Free Report) revenue fell in 2018 and 2019 and its first quarter fiscal 2020 sales dipped nearly 8%. On top of that, NWL stock has tumbled over 70% in the past three years and its near-term outlook might not help the consumer goods company turn things around.

The Basics

Newell is a consumer goods firm with a vast and diverse portfolio that includes Paper Mate, Coleman, Rubbermaid, Yankee Candle, and more. The current company was formed after a merger between Newell Rubbermaid and Jarden Corporation back in 2016.

NWL’s sales have dropped in the last few years as it tries to navigate the quickly changing retail landscape that has Wall Street and shoppers increasingly focused on e-commerce and new brands born in the social media age. The firm’s sales slipped 9% in 2018 and another 4.3% last year.

Worse still, Newell shares began to plummet in the summer of 2017—roughly one year after the merger—when they were trading at over $50 per share. NWL closed regular trading Friday, June 19 at $15.87 per share, down 70% from those 2017 highs. Newell stock is also still down 20% in 2020 despite having surged nearly 50% since the market’s March 23 lows to outpace its industry’s 37% expansion.

Investors should note that Newell announced in March 2019 that its chief executive would step down amid its struggles and activist investor pressure. The consumer goods firm then announced last July that Ravi Saligram would take over as CEO, effective in October 2019. NWL stock did experience a roughly three-month post-announcement boost, but the turn around is hardly underway just yet.

 

 

 

 

 

 

 

 

 

 

Outlook

Looking ahead, our current Zacks estimates call for Newell’s second quarter sales to sink 8.7% from the year-ago period. This would come in worse than Q1’s nearly 8% downturn. That said, its full-year fiscal 2020 revenue is only expected to dip 2.2%. And Newell’s FY21 sales are projected to come in 4.3% above our current-year estimate.

However, its bottom-line outlook appears far worse this year, with its adjusted second quarter earnings projected to fall 71% to hit $0.13 per share. This decline, coupled with a nearly 50% expected downturn in Q3 is estimated to push its adjusted full-year EPS figure down by over 38%.

Si Newell’s 2021 earnings are projected to jump 25% higher, but this would still come in below 2019’s figure. We can also see that its earnings revisions have trended heavily in the wrong direction, with Q2 down 67% and FY20 over 23% below where it rested 60 days ago.

 

 

 

 

 

 

 

 

 

Bottom Line

Newell’s negative earnings revisions help it hold a Zacks Rank #5 (Strong Sell) right now, alongside its “F” grade for Value and “D” for Momentum in our Style Scores system. It is worth pointing out that Newell’s dividend yield comes in at 5.80%, to blow away the S&P 500’s 1.88% average. But the impressive yield is largely a function of its poor stock price performance.

Newell could turn things around and the stock certainty has plenty of room to climb before it comes anywhere near its highs. Nonetheless, investors interested in the broader consumer goods industry might instead want to consider Zacks Rank #2 (Buy) stocks KimberlyClark (KMB - Free Report) and Purple Innovation, Inc. (PRPL - Free Report) .

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