Newell Brands Rises 5% After Reinstating Guidance

Newell Brands shares rose about 5% on Oct. 30 after the company beat 3Q estimates and reinstated guidance for the full-year.

The maker of popular consumer brands like Paper Mate, Sharpie and Parker generated sales of $2.70 billion, exceeding analysts’ forecast of $2.48 billion. Newell Brands’ (NWL) sales grew 5.1% year-over-year driven by strength in Home Solutions, Appliance and Cookware as well as Commercial Solutions units. The company’s international businesses, especially Latin America, performed better than the US business.

Meanwhile, adjusted EPS rose 15% to $0.84 in 3Q driven by higher sales and improved margins. Analysts expected an adjusted EPS of $0.43. Strong 3Q results helped the company reinstate its full-year guidance. Newell now expects sales of between $9.2 billion and $9.3 billion this year, with a low single-digit decline in core sales. It predicts 2020 adjusted EPS to land between $1.63 to $1.69, compared to $1.70 (pro forma) last year.   

For 4Q, the company predicts sales in the range of $2.5 billion to $2.6 billion, with flat to low single-digit core sales growth. Adjusted EPS is anticipated to be between $0.40 and $0.46, compared to $0.42 in 4Q19. (See NWL stock analysis on TipRanks)

Reiterating a Hold rating after the earnings release, Raymond James analyst Joseph Altobello stated, “We’d add that the company generated 3Q operating cash flow of $688M, bringing the YTD total to $820M, nearly doubling y/y and a testament to NWL’s continued progress on working capital. Further, the net leverage ratio ticked down to 3.9x vs. 4.6x at the end of June, clearly a good sign.”

The analyst also noted that the company reinstated its guidance based on improved visibility in recent months, though he feels that the outlook seems to imply a deterioration in trends in 4Q.

The Street is also sidelined on Newell Brands stock. A Hold analyst consensus breaks down into 1 Buy versus 7 Holds. Shares have declined about 8% so far this year. The $17.50 average analyst price target indicates that shares are fully priced at current levels.

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