Back to top

Newell Cuts 2017 Earnings View as Harvey Hits Resin Supply

Read MoreHide Full Article

Shares of Newell Brands (NWL - Free Report) have declined nearly 3.5% after the company trimmed its earnings guidance for 2017 on increased inflationary pressures due to low resins’ supply owing to impacts from the Hurricane Harvey. Now, the normalized earnings are envisioned in the band of $2.95 to $3.05 per share versus $3.00 to $3.20, anticipated during the first-quarter 2017 conference call.

However, the company’s net sales and core sales guidance remains intact. Newell Brands continues to expect net sales for 2017 in the range of $14.8-$15 billion, reflecting 11.5-13% growth compared with $13.26 billion reported in 2016. Notably, the sales guidance was raised during the second-quarter results. Further, it continues to anticipate core sales growth in a range of 2.5-4%.

Management also stated that most of the resin suppliers along with facilities in Texas and Louisiana have declared force majeure, since Harvey’s landfall on Aug 25. In fact, many of these facilities remained closed for more than a week.

Moreover, the effects of Harvey have significantly disrupted huge parts of the United States’ resin manufacturing supply chain, significantly raising operating costs.

Evidently, the devastating effects of Harvey have weighed upon the company’s third quarter. Further, these resin supply issues and increased inflation is likely to persist through the rest of 2017 and in to 2018.

Nonetheless, Newell Brands is working together with its global suppliers to discover other sources of resin, though this action exceeds the pre-determined costs targets, substantially.

Going forward, the company is also likely to continue investing in strategic capacities and brands to aid market share growth, albeit witnessing temporary margin contractions in comparison with 2017 plan.

Meanwhile, Newell Brands has been gaining from core sales growth, Project Renewal savings, cost synergies from Jarden, and the Sistema and WoodWick buys. Management expects to boost its performance in the second half backed by new distribution gains, a strong pipeline of innovations and e-Commerce strength.

It should be noted that the company hasn’t missed earnings estimates for almost seven years now. Its shares have gained nearly 5% year to date, ahead of the industry’s growth of 3.8%. Currently, Newell Brands carry a Zacks Rank #3 (Hold).

Looking for More? Check These Three Trending Picks from NWL’s Space

Better-ranked stocks in the broader Consumer Staples sector include Nomad Foods Limited (NOMD - Free Report) , Post Holdings, Inc. (POST - Free Report) and Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) .

Nomad Foods has delivered positive earnings surprise of 13.6% in the last quarter and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Post Holdings, a Zacks Rank #1 stock, has pulled off an average positive earnings surprise of 11.3% in the trailing four quarters. Also, it has a long-term earnings growth rate of 25%.

Ollie's Bargain, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 19.9%. Also, its earnings have outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average of 12.4%

One Simple Trading Idea

Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.

This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.

Learn more >>

More from Zacks Analyst Blog

You May Like