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Why Newell (NWL) is Poised to Beat Earnings Estimates in Q4

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Newell Brands Inc. (NWL - Free Report) is slated to report fourth-quarter 2018 results on Feb 15, before the opening bell. A glimpse of the company’s earnings performance shows that it has outpaced estimates in the trailing four quarters, delivering average positive earnings surprise of 36.3%.

However, the Zacks Consensus Estimate for earnings of 41 cents for the fourth quarter mirrors a decline of 39.7% from 68 cents registered in the year-ago quarter. Notably, the consensus mark has remained unchanged in the past 30 days. Let’s find out what is in store for Newell in the upcoming earnings release.

Newell Brands Inc. Price and EPS Surprise

 

Newell Brands Inc. Price and EPS Surprise | Newell Brands Inc. Quote

Factors at Play

Newell is progressing well with the Transformation plan, which is expected to create value and leverage its abilities, with respect to innovation, design and e-commerce. It also remains on track with the divestment of its non-core brands to reshape the portfolio and improve operational efficiency. In sync with this, management recently completed the sale of Pure Fishing and Jostens businesses for gross proceeds of nearly $2.6 billion.

Earlier, the company divested businesses, including The Waddington Group, Rawlings Sporting Goods Company and Goody Products, for about $2.6 billion of after-tax proceeds. Management continues to expect roughly $10 billion in net proceeds from these divestitures.

Notably, the company’s transformation efforts have been aiding bottom-line performance. Management raised view for normalized earnings per share in 2018 to reflect discrete tax benefits. Normalized earnings are envisioned to be $2.55-$2.75 per share, up from $2.45-$2.65 mentioned earlier. Raised earnings guidance for 2018 builds optimism regarding the company’s potential.

Meanwhile, the company’s top line has been grappling with headwinds resulting from the adoption of the new revenue recognition standard, unfavorable currency rates and decline in core sales. Further, sales continue to be impacted by loss of sales from Toys “R” Us, which has filed for bankruptcy.

Additionally, the company witnessed strained margins for the last few quarters now. Despite gains from cost synergies and savings, margins were hurt by the absence of earnings from divested businesses, commodity cost inflation, adverse product mix, and increased advertising, promotion and e-commerce investment.

While soft top line and margins have been hurting sentiment, management reiterated net sales guidance for 2018. However, the company expects core sales trend to improve sequentially in the fourth quarter. The Zacks Consensus Estimate for revenues in the fourth quarter is pegged at $2.4 billion, reflecting 35.8% decline from the prior-year quarter.

Expectations of sequential improvement in sales and optimism on the transformation plan helped the Newell stock show resilience in recent months. Notably, the stock has gained 1.4% in the past month, outperforming the industry’s growth of 0.3%. This reflects a positive sentiment on the stock ahead of earnings.

 



Zacks Model

Our proven model conclusively shows that Newell is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Newell has an Earnings ESP of +1.24% and a Zacks Rank #3 (Hold), which makes us confident of an earnings beat in the upcoming quarter.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) has an Earnings ESP of +0.21% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Coca-Cola Company (KO - Free Report) has an Earnings ESP of +0.88% and a Zacks Rank #3.

Molson Coors Brewing Company (TAP - Free Report) has an Earnings ESP of +2.35% and a Zacks Rank #3.

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