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) Misses Q3 Earnings & Sales, Lowers '17 Outlook
Read MoreHide Full Article
Newell Brands Inc. (NWL - Free Report) reported third-quarter 2017 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. Moreover, the company’s top line declined year over year. Consequently, management lowered its outlook for 2017.
Consequently, Newell’s shares declined 10.5% in the pre-market trading session. The stock was down 39.1% in the last three months, wider than the industry’s decline of 9%.
Results were below the company’s expectations and were hurt by soft late-quarter sales with respect to retailer inventory rebalancing, mainly related to the decelerated market growth, in the United States through the Back-to-School period. As a result, markets were weaker across various categories.
Q3 Highlights
Newell’s normalized earnings of 86 cents per share missed the Zacks Consensus Estimate of 92 cents in the third quarter but improved 10.3% year over year from 78 cents in the prior-year quarter. The year-over-year growth was driven by modest core sales improvement, the ongoing cost savings and related synergies, Project Renewal, acquisitions along with a more favorable tax rate. However, these were somewhat mitigated by the lost earnings from divested businesses, adverse product mix, commodity cost inflation, higher advertising, promotion and e-commerce investment coupled with a greater share count.
On a reported basis, including one-time items, the company recorded earnings of 48 cents per share compared with 38 cents a year ago.
Newell Brands Inc. Price, Consensus and EPS Surprise
Net sales dropped 7% to $3,678.2 million in the quarter, also missing the Zacks Consensus Estimate of $3,702 million. This represents a net adverse impact of 770 basis points (bps) from acquisitions and divestitures.
Core sales increased 0.4%, driven by solid performance by Baby and Food businesses within the Live segment, Waddington as well as Consumer and Commercial business within the Work segment, Team Sports and Fishing in the Play segment.
Segmental Performance
Live net sales increased 2.3% year over year to $1483.3 million while core sales improved 0.6%. The uptick was backed by solid results in the Baby and Food businesses, substantially offset by soft results from Appliances and Cookware.
Net sales in the Learn segment edged up 0.7% to $642 million while core sales were up 0.5%, on the back of modest improvement in all its divisions.
Work net sales rose 1.6% to $738 million while core sales improved 1.9%, owing to persistent growth on Waddington as well as robust results from the Consumer and Commercial business.
Sales at the Play segment increased 2.4% to $611 million while core sales advanced 2.3%, driven by growth across all the divisions along with solid growth in Team Sports and Fishing.
Net sales at the Other segment plunged 62.4% to $204 million, primarily due to the divestitures of the Tools, Winter Sports, Fire Starter as well as Fire Log and Cordage businesses. Further, core sales decreased 10.6% owing to soft Process Solutions business.
Margins
Newell’s normalized gross margin contracted 100 bps to 35% as cost synergies and savings gains were more than negated by adverse mix as well as higher commodity cost inflation.
Normalized operating income fell roughly 9.5% to $551 million. Normalized operating income margin also declined 40 bps to 15%. Gains from synergies and Project Renewal savings were higher than compensated with the absence of earnings related to divested businesses, commodity cost inflation, adverse product mix and increased advertising, promotion and e-commerce investment.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $792.3, long-term debt of $10,184.4 million and total shareholders’ equity of $12,770 million. In the nine months of 2017, the company used $58 million cash in operating activities.
Further, operating cash flow was $183 million in the quarter versus $513 million in the last year.
Additionally, the company’s board of directors has approved a share buyback plan in addition to the existing share repurchase program. Under the revised plan, Newell is authorized to buyback up to $1 billion of its outstanding shares through 2020-end. Still the company had $256 million left under its current $500 million share buyback plan. Earlier, the existing plan was expected to expire at the end of 2017 but now it is extended through the end of 2020.
Outlook
Newell is on track to attain its transformation initiatives. In fact, market share gains, point of sale growth, innovation, e-commerce improvement, along with cost-savings plans are expected to drive growth. Further, it continued to obtain cost synergies as anticipated, with an additional $86 million in the quarter.
However, management trimmed its guidance for 2017. Newell now expects normalized earnings per share in the range of $2.80-$2.85, down from $2.95-$3.05, projected earlier. In September, the company had trimmed its earnings guidance for 2017 on increased inflationary pressure due to low resins’ supply owing to impacts from the Hurricane Harvey.
Further, the company expects net sales for 2017 in the band of $14.7-$14.8 billion, reflecting 11.3-11.8% improvement from prior-year quarter. Moreover, core sales growth is anticipated in a range of 1.5-2%. However, the company had earlier maintained its net sales and core sales guidance. Newell Brands anticipated net sales for 2017 in the range of $14.8-$15 billion, reflecting 11.5-13% growth. Also, it forecasted core sales growth in a range of 2.5-4%.
Energizer, with a long-term earnings growth rate of 9.9%, has delivered an average positive earnings surprise of 23% in the past four quarters.
Estee Lauder, with a long-term earnings growth rate of 12.1%, has pulled off an average positive earnings surprise of 13.7% in the trailing four quarters.
Constellation Brands, with a long-term earnings growth rate of 14.8%, has come up with an average positive earnings surprise of 13.6% in the last four quarters.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Newell (NWL) Misses Q3 Earnings & Sales, Lowers '17 Outlook
Newell Brands Inc. (NWL - Free Report) reported third-quarter 2017 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. Moreover, the company’s top line declined year over year. Consequently, management lowered its outlook for 2017.
Consequently, Newell’s shares declined 10.5% in the pre-market trading session. The stock was down 39.1% in the last three months, wider than the industry’s decline of 9%.
Results were below the company’s expectations and were hurt by soft late-quarter sales with respect to retailer inventory rebalancing, mainly related to the decelerated market growth, in the United States through the Back-to-School period. As a result, markets were weaker across various categories.
Q3 Highlights
Newell’s normalized earnings of 86 cents per share missed the Zacks Consensus Estimate of 92 cents in the third quarter but improved 10.3% year over year from 78 cents in the prior-year quarter. The year-over-year growth was driven by modest core sales improvement, the ongoing cost savings and related synergies, Project Renewal, acquisitions along with a more favorable tax rate. However, these were somewhat mitigated by the lost earnings from divested businesses, adverse product mix, commodity cost inflation, higher advertising, promotion and e-commerce investment coupled with a greater share count.
On a reported basis, including one-time items, the company recorded earnings of 48 cents per share compared with 38 cents a year ago.
Newell Brands Inc. Price, Consensus and EPS Surprise
Newell Brands Inc. Price, Consensus and EPS Surprise | Newell Brands Inc. Quote
Net sales dropped 7% to $3,678.2 million in the quarter, also missing the Zacks Consensus Estimate of $3,702 million. This represents a net adverse impact of 770 basis points (bps) from acquisitions and divestitures.
Core sales increased 0.4%, driven by solid performance by Baby and Food businesses within the Live segment, Waddington as well as Consumer and Commercial business within the Work segment, Team Sports and Fishing in the Play segment.
Segmental Performance
Live net sales increased 2.3% year over year to $1483.3 million while core sales improved 0.6%. The uptick was backed by solid results in the Baby and Food businesses, substantially offset by soft results from Appliances and Cookware.
Net sales in the Learn segment edged up 0.7% to $642 million while core sales were up 0.5%, on the back of modest improvement in all its divisions.
Work net sales rose 1.6% to $738 million while core sales improved 1.9%, owing to persistent growth on Waddington as well as robust results from the Consumer and Commercial business.
Sales at the Play segment increased 2.4% to $611 million while core sales advanced 2.3%, driven by growth across all the divisions along with solid growth in Team Sports and Fishing.
Net sales at the Other segment plunged 62.4% to $204 million, primarily due to the divestitures of the Tools, Winter Sports, Fire Starter as well as Fire Log and Cordage businesses. Further, core sales decreased 10.6% owing to soft Process Solutions business.
Margins
Newell’s normalized gross margin contracted 100 bps to 35% as cost synergies and savings gains were more than negated by adverse mix as well as higher commodity cost inflation.
Normalized operating income fell roughly 9.5% to $551 million. Normalized operating income margin also declined 40 bps to 15%. Gains from synergies and Project Renewal savings were higher than compensated with the absence of earnings related to divested businesses, commodity cost inflation, adverse product mix and increased advertising, promotion and e-commerce investment.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $792.3, long-term debt of $10,184.4 million and total shareholders’ equity of $12,770 million. In the nine months of 2017, the company used $58 million cash in operating activities.
Further, operating cash flow was $183 million in the quarter versus $513 million in the last year.
Additionally, the company’s board of directors has approved a share buyback plan in addition to the existing share repurchase program. Under the revised plan, Newell is authorized to buyback up to $1 billion of its outstanding shares through 2020-end. Still the company had $256 million left under its current $500 million share buyback plan. Earlier, the existing plan was expected to expire at the end of 2017 but now it is extended through the end of 2020.
Outlook
Newell is on track to attain its transformation initiatives. In fact, market share gains, point of sale growth, innovation, e-commerce improvement, along with cost-savings plans are expected to drive growth. Further, it continued to obtain cost synergies as anticipated, with an additional $86 million in the quarter.
However, management trimmed its guidance for 2017. Newell now expects normalized earnings per share in the range of $2.80-$2.85, down from $2.95-$3.05, projected earlier. In September, the company had trimmed its earnings guidance for 2017 on increased inflationary pressure due to low resins’ supply owing to impacts from the Hurricane Harvey.
Further, the company expects net sales for 2017 in the band of $14.7-$14.8 billion, reflecting 11.3-11.8% improvement from prior-year quarter. Moreover, core sales growth is anticipated in a range of 1.5-2%. However, the company had earlier maintained its net sales and core sales guidance. Newell Brands anticipated net sales for 2017 in the range of $14.8-$15 billion, reflecting 11.5-13% growth. Also, it forecasted core sales growth in a range of 2.5-4%.
Zacks Rank & Key Picks
Newell Brands has a Zacks Rank #4 (Sell). Better-ranked stocks in the broader Consumer Staples sector include Energizer Holdings, Inc. (ENR - Free Report) , The Estee Lauder Companies Inc. (EL - Free Report) and Constellation Brands, Inc. (STZ - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Energizer, with a long-term earnings growth rate of 9.9%, has delivered an average positive earnings surprise of 23% in the past four quarters.
Estee Lauder, with a long-term earnings growth rate of 12.1%, has pulled off an average positive earnings surprise of 13.7% in the trailing four quarters.
Constellation Brands, with a long-term earnings growth rate of 14.8%, has come up with an average positive earnings surprise of 13.6% in the last four quarters.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>