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Can Newell's Cost-Saving Drive Sustain Its Margin Expansion Momentum?

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Key Takeaways

  • NWL's gross margin rose 80 bps YoY to 35.6% and operating margin gained 10 bps to 10.7% in Q2.
  • Cost savings stem from $2B in automation, tariff pricing actions and overhead reduction.
  • NWL guides 2025 operating margin at 9-9.5% with EPS of $0.66-$0.70 on expected top-line gains.

Newell Brands Inc. (NWL - Free Report) has demonstrated meaningful progress in its margin recovery, even as top-line sales remain pressured. In second-quarter 2025, normalized gross margin rose 80 basis points year over year to 35.6%. The normalized operating margin expanded 10 basis points to 10.7%. This marked the eighth consecutive quarter of margin improvement, reflecting structural productivity initiatives, disciplined cost controls and targeted price actions that offset inflation and tariff headwinds. Importantly, the company has committed to doubling its evergreen margin-expansion target, now expecting a 110-basis-point operating margin gain in 2025 compared with 2024.

The cost-saving strategy is multi-pronged. Since 2017, Newell has invested nearly $2 billion in its North American production system, enhancing automation and giving it tariff-advantaged manufacturing capacity. This supply chain leverage, coupled with three rounds of tariff-related price adjustments and ongoing productivity programs, is expected to fully offset $155 million of gross tariff costs in 2025. Additionally, management is targeting a reduction in overhead as a percentage of sales, beginning in the third quarter, after years of reinvestment in brand management, consumer insights and ERP harmonization. These actions should further improve operating leverage as sales stabilize.

Looking ahead, Newell projects normalized operating margins of 9% to 9.5% for full-year 2025, alongside normalized EPS guidance of 66-70 cents. With tariff-related pricing largely behind it and incremental productivity savings flowing through, management expects sequential top-line improvement in the second half, supported by distribution gains and innovation launches. The long-term ambition is to reach a 37-38% gross margin range and sustainably expand operating margins, underpinned by innovation, automation and a more streamlined overhead base. Despite continued consumer demand headwinds, Newell’s consistent execution of cost-saving initiatives suggests margin expansion can remain on track, positioning the company for stronger earnings power once category growth improves.

Newell’s Zacks Rank & Share Price Performance

Shares of this Zacks Rank #3 (Hold) company have gained 11.8% over the past three months against both the industry and the broader Consumer Staples sector, which declined 4.6% and 4.2%, respectively. The stock also outperformed the S&P 500, which gained 9.5% during the same period.

NWL Stock's Past Three-Month Performance

Zacks Investment Research
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Is NWL a Value Play Stock?

Newell currently trades at a forward 12-month P/E ratio of 8.87X, which is notably down from the industry average of 19.80X and the sector average of 16.85X. This valuation positions the stock at a modest discount relative to both its direct peers and the broader consumer staples sector.

NWL P/E Ratio (Forward 12 Months)                                        

Zacks Investment Research
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Stocks to Consider

Post Holdings, Inc. (POST - Free Report) operates as a consumer-packaged goods holding company in the United States and internationally. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Post Holdings’ current fiscal-year sales and earnings indicates growth of 3.1% and 11%, respectively, from the prior-year levels. POST delivered a trailing four-quarter earnings surprise of 21.4%, on average.

The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. It currently sports a Zacks Rank of 1. CHEF delivered a trailing four-quarter earnings surprise of 11.3%, on average.

The Zacks Consensus Estimate for The Chefs' Warehouse’s current fiscal-year sales and earnings indicates growth of 6.6% and 19.1%, respectively, from the prior-year levels.

Laird Superfood, Inc. (LSF - Free Report) manufactures and markets plant-based, natural and functional food in the United States. It has a Zacks Rank #2 (Buy) at present. LSF delivered a trailing four-quarter earnings surprise of 11.3%, on average.

The Zacks Consensus Estimate for Laird Superfood’s current fiscal-year sales and earnings indicates growth of 21% and 23.8%, respectively, from the prior-year levels.

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