We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Newell (NWL) Beats on Q3 Earnings, Updates 2016 Outlook
Read MoreHide Full Article
Newell Brands Inc. (NWL - Free Report) came up with third-quarter 2016 results, which marked the second quarter in which the company reported results including the recently acquired Jarden business. Both top and bottom lines improved year over year, while earnings marked its third consecutive beat in the quarter. Notably, Newell hasn’t delivered a single earnings miss for seven years now, as its bottom line has topped estimates in 26 out of the past 28 quarters. Further, the company raised the lower end of its 2016 outlook, underscoring confidence in its future prospects.
Newell’s adjusted earnings of 78 cents a share in the third quarter beat the Zacks Consensus Estimate of 73 cents and surged 25.8% year over year. Earnings mainly gained from robust sales growth, contributions from buyouts, synergies associated with Jarden’s acquisition and Project Renewal savings, partly muted by adverse currency effects, as well as an increase in interest expense and shares outstanding.
On a reported basis, including one-time items, the company recorded earnings of 38 cents per share, down 24% from the prior-year earnings of 50 cents.
Net sales jumped a substantial 158.5% to $3,954.6 million in the quarter, but fell short of the Zacks Consensus Estimate of $4,046 million. The stupendous increase in sales was mainly due to considerable contribution from the recently acquired Jarden business.
Core sales climbed 3%, driven by solid performance of the Writing, Baby, Food, and Appliance businesses, somewhat negated by weakness noted across the Commercial Products and Outdoor Solutions segments.
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 on Apr 15, 2015. Core sales exclude the impact from acquisitions (except that of Jarden) until one year of their completion, divestitures, deconsolidation of Venezuelan operations, and currency movements.
Segmental Performance
Writing net sales improved 14.5% year over year to $526.3 million, while core sales increased 7.7%. Net sales in the Tools segment declined 5.7% to $185.5 million, while core sales jumped 4.6%. Commercial Products net sales decreased 3.7% to $199.2 million, while core sales fell 1.8%. Sales for the Home Solutions segment slumped 19.1% to $371.8 million, with core sales down 0.5%. Net sales for the Baby & Parenting segment increased 11.3% to $231.1 million, while core sales grew 10.6%.
Branded Consumables net sales were $957.3 million, while pro forma net sales for the segment rose 5.2% and pro forma core sales inched up 0.6%. Consumer Solutions net sales were $650 million, while pro forma net sales increased 7.9% and pro forma core sales rose 9.3%. Outdoor Solutions segment reported net sales of $731.9 million, with pro forma net sales rising 12.1% and pro forma core sales down 3.2%. Process Solutions segment posted net sales of $101.5 million, whereas pro forma net sales were up 11.4% and pro forma core sales increased 12.4%.
Margins
Newell’s normalized gross margin contracted 350 basis points (bps) to 36% as the pricing, synergies 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 162% to $608.9 million. Normalized operating income margin improved 20 bps to 15.4%, as the company’s Project Renewal savings more than offset the negative mix effect of the Jarden acquisition, impact from the absence of Venezuelan operations and adverse currency effects.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $670 million, long-term debt of $12,043.3 million, and shareholders’ equity of $11,462.3 million. In the first three quarters of 2016, the company provided operating cash flow of $837 million.
Strategic Plan
Notably, Newell announced a new strategic growth game plan recently (Please Read: Newell Simplifies Operating Structure to Fuel Growth), as part of which it also inked a deal to sell its Tool business to Stanley Black & Decker Inc. (SWK - Free Report) . The sale is expected to conclude in the first half of 2017.
This forms part of the company’s goal of consolidating its 32 business units into 16, alongside enhancing its focus on areas with greater growth potential. Newell already started making the organizational amendments in the third quarter, and is on track to complete a major chunk of the transformation by this year itself.
These plans also complement the company’s plans to exit product lines with annual sales in the range of $250–$300 million across both businesses over the next two to three years. Also, in this regard, the company anticipates exiting product lines with annual sales of $75–$125 million by the end of 2018, which is likely to dent core sales.
Following a splendid quarter, this Zacks Rank #3 (Hold) company raised the lower end of its core sales and adjusted earnings guidance for 2016.
Newell now expects core sales growth for 2016 in a range of 3.5%–4%, compared to 3–4% growth projected earlier. Normalized earnings per share are now expected in the range of $2.85−$2.90, compared to $2.75–$2.90 guided earlier. Additionally, the company anticipates shares outstanding of nearly 425 million and an effective tax rate of 27.5%.
On a reported basis, the company projects sales to grow by 122.5%−128%, with earnings expected in a range of $1.15−$1.20 per share.
The company also issued its first outlook for 2017, wherein it envisions core sales growth in a band of 3%−4%. Normalized earnings per share for 2017 are expected in a range of $2.85−$3.05, which includes nearly 20 cents impact from the company’s new game plan.
Ollie's Bargain has to its credit a spectacular earnings trend as the company delivered a positive earnings surprise over the past four quarters. Moreover, its long-term EPS growth rate of 20.2% and positive estimate revisions over the past 60 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 16%, has seen positive estimate revisions for 2016, over the past 90 days. The company also flaunts a solid earnings surprise history.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Newell (NWL) Beats on Q3 Earnings, Updates 2016 Outlook
Newell Brands Inc. (NWL - Free Report) came up with third-quarter 2016 results, which marked the second quarter in which the company reported results including the recently acquired Jarden business. Both top and bottom lines improved year over year, while earnings marked its third consecutive beat in the quarter. Notably, Newell hasn’t delivered a single earnings miss for seven years now, as its bottom line has topped estimates in 26 out of the past 28 quarters. Further, the company raised the lower end of its 2016 outlook, underscoring confidence in its future prospects.
Newell’s adjusted earnings of 78 cents a share in the third quarter beat the Zacks Consensus Estimate of 73 cents and surged 25.8% year over year. Earnings mainly gained from robust sales growth, contributions from buyouts, synergies associated with Jarden’s acquisition and Project Renewal savings, partly muted by adverse currency effects, as well as an increase in interest expense and shares outstanding.
On a reported basis, including one-time items, the company recorded earnings of 38 cents per share, down 24% from the prior-year earnings of 50 cents.
Net sales jumped a substantial 158.5% to $3,954.6 million in the quarter, but fell short of the Zacks Consensus Estimate of $4,046 million. The stupendous increase in sales was mainly due to considerable contribution from the recently acquired Jarden business.
Core sales climbed 3%, driven by solid performance of the Writing, Baby, Food, and Appliance businesses, somewhat negated by weakness noted across the Commercial Products and Outdoor Solutions segments.
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 on Apr 15, 2015. Core sales exclude the impact from acquisitions (except that of Jarden) until one year of their completion, divestitures, deconsolidation of Venezuelan operations, and currency movements.
Segmental Performance
Writing net sales improved 14.5% year over year to $526.3 million, while core sales increased 7.7%. Net sales in the Tools segment declined 5.7% to $185.5 million, while core sales jumped 4.6%. Commercial Products net sales decreased 3.7% to $199.2 million, while core sales fell 1.8%. Sales for the Home Solutions segment slumped 19.1% to $371.8 million, with core sales down 0.5%. Net sales for the Baby & Parenting segment increased 11.3% to $231.1 million, while core sales grew 10.6%.
Branded Consumables net sales were $957.3 million, while pro forma net sales for the segment rose 5.2% and pro forma core sales inched up 0.6%. Consumer Solutions net sales were $650 million, while pro forma net sales increased 7.9% and pro forma core sales rose 9.3%. Outdoor Solutions segment reported net sales of $731.9 million, with pro forma net sales rising 12.1% and pro forma core sales down 3.2%. Process Solutions segment posted net sales of $101.5 million, whereas pro forma net sales were up 11.4% and pro forma core sales increased 12.4%.
Margins
Newell’s normalized gross margin contracted 350 basis points (bps) to 36% as the pricing, synergies 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 162% to $608.9 million. Normalized operating income margin improved 20 bps to 15.4%, as the company’s Project Renewal savings more than offset the negative mix effect of the Jarden acquisition, impact from the absence of Venezuelan operations and adverse currency effects.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $670 million, long-term debt of $12,043.3 million, and shareholders’ equity of $11,462.3 million. In the first three quarters of 2016, the company provided operating cash flow of $837 million.
Strategic Plan
Notably, Newell announced a new strategic growth game plan recently (Please Read: Newell Simplifies Operating Structure to Fuel Growth), as part of which it also inked a deal to sell its Tool business to Stanley Black & Decker Inc. (SWK - Free Report) . The sale is expected to conclude in the first half of 2017.
This forms part of the company’s goal of consolidating its 32 business units into 16, alongside enhancing its focus on areas with greater growth potential. Newell already started making the organizational amendments in the third quarter, and is on track to complete a major chunk of the transformation by this year itself.
These plans also complement the company’s plans to exit product lines with annual sales in the range of $250–$300 million across both businesses over the next two to three years. Also, in this regard, the company anticipates exiting product lines with annual sales of $75–$125 million by the end of 2018, which is likely to dent core sales.
NEWELL BRANDS Price, Consensus and EPS Surprise
NEWELL BRANDS Price, Consensus and EPS Surprise | NEWELL BRANDS Quote
Outlook
Following a splendid quarter, this Zacks Rank #3 (Hold) company raised the lower end of its core sales and adjusted earnings guidance for 2016.
Newell now expects core sales growth for 2016 in a range of 3.5%–4%, compared to 3–4% growth projected earlier. Normalized earnings per share are now expected in the range of $2.85−$2.90, compared to $2.75–$2.90 guided earlier. Additionally, the company anticipates shares outstanding of nearly 425 million and an effective tax rate of 27.5%.
On a reported basis, the company projects sales to grow by 122.5%−128%, with earnings expected in a range of $1.15−$1.20 per share.
The company also issued its first outlook for 2017, wherein it envisions core sales growth in a band of 3%−4%. Normalized earnings per share for 2017 are expected in a range of $2.85−$3.05, which includes nearly 20 cents impact from the company’s new game plan.
Stocks to Consider
Better-ranked stocks in the same industry include Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and Blue Buffalo Pet Products, Inc. (BUFF - Free Report) , each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Ollie's Bargain has to its credit a spectacular earnings trend as the company delivered a positive earnings surprise over the past four quarters. Moreover, its long-term EPS growth rate of 20.2% and positive estimate revisions over the past 60 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 16%, has seen positive estimate revisions for 2016, over the past 90 days. The company also flaunts a solid earnings surprise history.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>