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Newell Brands Inc. (NWL - Free Report) came up with robust second-quarter 2016 results, which is the company’s first quarter where it is reporting results including the recently-acquired Jarden business. Top and bottom lines in the quarter beat estimates and surged year over year, mainly benefiting from the Jarden acquisition, along with strong sales performances at various businesses – including Writing, Baby, Food & Beverage, Yankee Candle and Appliances. Further, the company remains confident of reaching its 2016 earnings and sales targets.
Newell’s second quarter adjusted earnings of 78 cents a share beat the Zacks Consensus Estimate of 73 cents and rose 21.9% year over year. Earnings mainly gained from robust sales growth, contributions from the Jarden and Elmer’s acquisitions and Project Renewal savings, partly muted by adverse currency effects, as well as an increase in tax rate, advertising and promotion expenses, interest expense and shares outstanding.
On a reported basis, including one-time items, the company recorded earnings of 30 cents per share, down 45.5% from the prior-year earnings of 55 cents.
Net sales jumped by a substantial 147.2% to $3,858.6 million in the quarter and surpassed the Zacks Consensus Estimate of $3,752 million. The stupendous increase in sales is mainly due to $2.22 billion contribution from the recently-acquired Jarden business.
Core sales climbed 5%. The company’s core sales as of Apr 15, 2016 include the pro forma core sales associated with the Jarden transaction as if the combination occurred Apr 15, 2015. Core sales exclude the gain of 1,600 basis points (bps) from acquisitions, divestitures and the Dec 31, 2015 deconsolidation of Venezuelan operations, as well as an adverse 130 bps impact from foreign currency translation.
Segmental Performance
Writing net sales improved 15.8% year over year to $574.4 million, while core sales increased 11.3%. Net sales in the Tools segment declined 3.8% to $197.4 million, with core sales falling 2.3%. Commercial Products net sales decreased 7.9% to $194 million, while core sales fell 1.4%. Sales for the Home Solutions segment dipped 1.1% to $433.5 million, but core sales jumped 1.7%. Net sales for the Baby & Parenting segment soared 12.4% to $236.9 million, while core sales grew 11.1%.
Branded Consumables net sales were $777.3 million, while pro forma net sales for the segment rose 36.8% and core sales increased 7.8% on a pro forma basis. Consumer Solutions net sales were $406.6 million, while pro forma net sales increased 4.9% and pro forma core sales rose 8.3%. Outdoor Solutions segment reported net sales of $953.4 million, with pro forma net sales rising 53.6% and pro forma core sales jumping 0.5%. Process Solutions segment posted net sales of $85.1 million, whereas pro forma net sales were up 0.2% and pro forma core sales increased 0.5%.
Margins
Newell’s normalized gross margin contracted 280 bps to 37.2% as the pricing and productivity gains were more than offset by adverse effects of the Jarden acquisition and the deconsolidation of Venezuelan operations coupled with negative currency headwinds.
Normalized operating income grew roughly 143.7% to $607.9 million. However, normalized operating income margin contracted 20 bps to 15.8%, again from the negative mix effect of the Jarden acquisition, along with higher advertising and promotion expenses and adverse currency effects. This was partly countered by the company’s Project Renewal savings, cost synergies and positive mix effect of healthy growth in Writing segment.
Other Financial Details
Newell ended the second quarter with cash and cash equivalents of $627.3 million, long-term debt of $12,044.8 million, and shareholders’ equity of $11,343.1 million. In the first half of 2016, the company provided operating cash flow of $325.6 million.
Outlook
Following a splendid second quarter, this Zacks Rank #3 (Hold) company reiterated its core sales and adjusted earnings guidance for 2016.
Newell expects core sales growth of 3–4% for 2016. This guidance assumes standalone Newell Rubbermaid core sales growth of 4–5% and Jarden core sales growth of 2–4%, including the negative impact from planned product line exits. Jarden’s core sales growth target for 2016 is in line with the company’s long-term organic growth guidance of 3–5%.
Over the next two to three years, Newell Brands plans to exit product lines with annual sales in the range of $250–$300 million across both businesses.
Normalized earnings per share are expected in the range of $2.75–$2.90 for 2016. Additionally, the company anticipates shares outstanding of nearly 430 million and an effective tax rate of 29–30%.
Some other well-ranked stocks in the same industry are Kao Corp. , Ollie's Bargain Outlet Holdings Inc. (OLLI - Free Report) and Blue Buffalo Pet Products Inc. (BUFF - Free Report) , each with a Zacks Rank #1 (Strong Buy).
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Newell (NWL) Tops Q2 Earnings Estimates, Keeps 2016 View
Newell Brands Inc. (NWL - Free Report) came up with robust second-quarter 2016 results, which is the company’s first quarter where it is reporting results including the recently-acquired Jarden business. Top and bottom lines in the quarter beat estimates and surged year over year, mainly benefiting from the Jarden acquisition, along with strong sales performances at various businesses – including Writing, Baby, Food & Beverage, Yankee Candle and Appliances. Further, the company remains confident of reaching its 2016 earnings and sales targets.
Newell’s second quarter adjusted earnings of 78 cents a share beat the Zacks Consensus Estimate of 73 cents and rose 21.9% year over year. Earnings mainly gained from robust sales growth, contributions from the Jarden and Elmer’s acquisitions and Project Renewal savings, partly muted by adverse currency effects, as well as an increase in tax rate, advertising and promotion expenses, interest expense and shares outstanding.
On a reported basis, including one-time items, the company recorded earnings of 30 cents per share, down 45.5% from the prior-year earnings of 55 cents.
Net sales jumped by a substantial 147.2% to $3,858.6 million in the quarter and surpassed the Zacks Consensus Estimate of $3,752 million. The stupendous increase in sales is mainly due to $2.22 billion contribution from the recently-acquired Jarden business.
Core sales climbed 5%. The company’s core sales as of Apr 15, 2016 include the pro forma core sales associated with the Jarden transaction as if the combination occurred Apr 15, 2015. Core sales exclude the gain of 1,600 basis points (bps) from acquisitions, divestitures and the Dec 31, 2015 deconsolidation of Venezuelan operations, as well as an adverse 130 bps impact from foreign currency translation.
Segmental Performance
Writing net sales improved 15.8% year over year to $574.4 million, while core sales increased 11.3%. Net sales in the Tools segment declined 3.8% to $197.4 million, with core sales falling 2.3%. Commercial Products net sales decreased 7.9% to $194 million, while core sales fell 1.4%. Sales for the Home Solutions segment dipped 1.1% to $433.5 million, but core sales jumped 1.7%. Net sales for the Baby & Parenting segment soared 12.4% to $236.9 million, while core sales grew 11.1%.
Branded Consumables net sales were $777.3 million, while pro forma net sales for the segment rose 36.8% and core sales increased 7.8% on a pro forma basis. Consumer Solutions net sales were $406.6 million, while pro forma net sales increased 4.9% and pro forma core sales rose 8.3%. Outdoor Solutions segment reported net sales of $953.4 million, with pro forma net sales rising 53.6% and pro forma core sales jumping 0.5%. Process Solutions segment posted net sales of $85.1 million, whereas pro forma net sales were up 0.2% and pro forma core sales increased 0.5%.
Margins
Newell’s normalized gross margin contracted 280 bps to 37.2% as the pricing and productivity gains were more than offset by adverse effects of the Jarden acquisition and the deconsolidation of Venezuelan operations coupled with negative currency headwinds.
Normalized operating income grew roughly 143.7% to $607.9 million. However, normalized operating income margin contracted 20 bps to 15.8%, again from the negative mix effect of the Jarden acquisition, along with higher advertising and promotion expenses and adverse currency effects. This was partly countered by the company’s Project Renewal savings, cost synergies and positive mix effect of healthy growth in Writing segment.
Other Financial Details
Newell ended the second quarter with cash and cash equivalents of $627.3 million, long-term debt of $12,044.8 million, and shareholders’ equity of $11,343.1 million. In the first half of 2016, the company provided operating cash flow of $325.6 million.
Outlook
Following a splendid second quarter, this Zacks Rank #3 (Hold) company reiterated its core sales and adjusted earnings guidance for 2016.
Newell expects core sales growth of 3–4% for 2016. This guidance assumes standalone Newell Rubbermaid core sales growth of 4–5% and Jarden core sales growth of 2–4%, including the negative impact from planned product line exits. Jarden’s core sales growth target for 2016 is in line with the company’s long-term organic growth guidance of 3–5%.
Over the next two to three years, Newell Brands plans to exit product lines with annual sales in the range of $250–$300 million across both businesses.
Normalized earnings per share are expected in the range of $2.75–$2.90 for 2016. Additionally, the company anticipates shares outstanding of nearly 430 million and an effective tax rate of 29–30%.
NEWELL BRANDS Price, Consensus and EPS Surprise
NEWELL BRANDS Price, Consensus and EPS Surprise | NEWELL BRANDS Quote
Other Stocks to Consider
Some other well-ranked stocks in the same industry are Kao Corp. , Ollie's Bargain Outlet Holdings Inc. (OLLI - Free Report) and Blue Buffalo Pet Products Inc. (BUFF - Free Report) , each with a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>