Newell Brands Inc.

NWLDetails
 
Product Innovation to Aid Business Prospects:Newell Brands Inc. (NASDAQ: NWL) is a global consumer goods company which includes brands such as Paper Mate®, Sharpie®, Dymo®, EXPO®, Parker®, etc. in its product portfolio. On 31 December 2019, the company announced the conclusion of its Accelerated Transformation Plan, which began at the beginning of 2018. Newell Brands Inc. had sold The United States Playing Card Company ("USPC") to Cartamundi Group. The deal involves the sale of brands like Aviator, Bicycle, Hoyle, Fournier and Bee.
 
Q3FY19 Operational Highlights for the Period ended 30 September 2019: NWL announced its quarterly highlights, wherein the company reported net sales at $2,450.6 million, down 3.8% on y-o-y basis primarily due to the unfavorable impact of foreign exchange and a 2.5% decline in core sales.The company reported a gross profit of $810.7 million as compared to $915.4 million in the previous corresponding year. Gross margin stood at 33.1% as compared to 35.9% in Q3FY18 as pricing and productivity got offset from headwinds from foreign exchange, tariffs, inflation and higher depreciation. The company reported an operating loss of $634.8 million as compared to an operating loss of $7,835.1 million in the previous corresponding quarter on account of impairment charges in both financial years. The company reported selling, general and administrative expenses at 24.8% of the total sales, as compared to 23.7% in the previous corresponding period. Net loss, during the period, came in at $625.8 million as compared to $7,311 million in the previous corresponding quarter.
 

Q3FY19 Income Statement Highlights (Source: Company Reports)
 
Other Operating Highlights:Non-cash impairment charge from continuing operations, stood at $835 million, driven by impairment of trade names in the Appliances & Cookware, Home Fragrance and Outdoor & Recreation divisions. NWL reported normalized tax benefit at $58.6 million compared to a tax- benefit of $78.3 million in Q3FY18. On a nine-month basis, NWL reported operating cash flow at $424 million, improved from $182 million in Q3FY18, aided by strong working capital initiatives which was partially offset by the foregone contribution from the divested businesses.
 
Guidance:For FY19, the company expects net sales to be in the range of$9.6 billion to $9.7 billion, while the company expects a decline in its core sales at low single-digit. Normalized operating margin is expected to improve by 30 to 50 basis points and is expected within the range of 10.6% to 10.8%. NWL expects normalized EPS to be between$1.63 to $1.68 while operating cash flow is anticipated within $700 million to $850 million. For Q4FY19, the company expects net sales to be in the range of $2.5 billion to $2.6 billion, while core sales are anticipated to decline by 2% to 4% on y-o-y basis. Normalized EPS for Q4FY19 is expected within $0.35 to $0.40.

Stock Recommendation: The stock of NWL closed at $19.24 with a market capitalization of ~$8.146 billion. The stock is trading at the upper band of its 52-week trading range of $13.04 to $22.06. The stock has generated a positive return of 26.9967% in the last six-months. The company reported encouraging results from four segments, which have experienced core sales growth in the recent past. The company’s online sales continue to build momentum, followed by higher cash flow in the coming quarters. The company is focused on driving sustainable, profitable organic growth through clarity and stability of direction, in order to add meaningful innovation to its product-line. The business is likely to enhance the digital IQ segment resulting in lower complexities and providing greater focus on the clients. Considering the aforesaid facts, trading levels and price movements, we recommend a ‘BUY’ rating on the stock at the closed market price of $19.24, up 0.42% as on 10 January 2020.

 
NWL Daily Technical Chart (Source: Thomson Reuters)

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