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Newell Brands (NWL) Lowers View on Soft Demand & Inflation

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Newell Brands Inc. (NWL - Free Report) slashed its third-quarter and 2022 guidance due to continued inflationary pressure, the current challenging macro environment and fewer retail orders. However, it remains optimistic about its back-to-school season and continues to witness strength across its Commercial business.

In order to mitigate the hurdles, the company is undertaking stringent cash and cost-management efforts, as well as adjusting its supply-chain network. Some other notable actions include accelerated FUEL productivity efforts, managing discretionary and overhead spending, optimizing advertising and promotion expenses, adjusting its demand forecast and supply plans, and improving working capital.

For 2022, management expects sales of $9.37-$9.58 billion, down from the earlier stated $9.76-$9.98 billion. Core sales are anticipated to decline 2-4% compared with the prior mentioned flat to 2% growth. Normalized earnings are envisioned to be $1.56-$1.70, down from the aforementioned $1.79-$1.86.

The normalized operating margin is likely to be 10-10.5% compared with the previously communicated 11.2-11.4%. Sales, core sales and normalized earnings for 2022 include the contributions from the divested Connected Home & Security business unit ("CH&S"). Meanwhile, the core sales guidance excludes the contribution from the CH&S sale.

The company also revised its outlook for third-quarter 2022. Sales are anticipated to be $2.21-$2.32 billion, down from the prior mentioned $2.39-$2.50 billion. Core sales are likely to decline 8-12% compared with the earlier stated 1-5% dip. The bottom line is expected to be 46-51 cents, down from the last mentioned 50-54 cents. The normalized operating margin is forecast to be 8.7-9.4%, down from the previously communicated 10.7-11%.

The sales view for the third quarter and 2022 reflects the adverse impacts of unfavorable foreign exchange movements, closures of Yankee Candle retail locations, and market and category exit, primarily in the Outdoor & Recreation and Home Appliances segments.

Also, Newell Brands predicts an operating cash flow of $400-$500 million for 2022, down from the prior stated $700-$800 million. This includes the negative impacts of the sale of the CH&S business and a one-time cash tax payment on this divestiture.


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Shares of this Zacks Rank #4 (Sell) have plunged 17% in the past three months compared with the industry’s decline of 9.8%.

Stocks to Consider

Some better-ranked stocks to consider are The Chef's Warehouse (CHEF - Free Report) , MGP Ingredients (MGPI - Free Report) and General Mills (GIS - Free Report) .

Chef’s Warehouse, a distributor of specialty food products in the United States, currently flaunts a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 355.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Chef Warehouse’s current financial year’s sales suggests growth of 40.7% from the year-ago reported number.

MGP Ingredients, which produces and markets ingredients and distillery products, currently sports a Zacks Rank of 1. MGPI has a trailing four-quarter earnings surprise of 76.8%, on average.

The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 22.4% and 10.4%, respectively, from the year-ago reported figures.

General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2. GIS has a trailing four-quarter earnings surprise of 6.5%, on average.

The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings per share suggests growth of 2% and 1.5%, respectively, from the year-ago reported figures.

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