Newell Brands Inc.

NWL Details

Extension of Agreement: Newell Brands Inc (NASDAQ: NWL) is a reputed consumer goods company and includes a portfolio of well-known brands such as Rubbermaid, Paper Mate, Sharpie, to name a few. The market capitalization of the company as on 26 May 2021 stood at ~$12.01 billion. As per a recent announcement, United Solutions, which is a manufacturer of plastic product solutions, has extended its licensing agreement with Rubbermaid Incorporated. The agreement extension will help in sales expansion of ActionPacker, Cleverstore, All-Access and Roughneck storage solutions. The tenure of the agreement is of 7-year and will provide United Solutions exclusive rights to manufacture, market and sell storage products under the Rubbermaid brands.

Q1FY21 Performance Update: During the period, the company delivered impressive sales growth of 21.3% to $2.3 billion when compared to the previous corresponding period. The core sales witnessed a growth of 20.9% compared to the pcp. The reported operating margin improved to 8.4%, compared to negative 74.7% in the prior corresponding period. The net income stood at $89 million in Q1FY21.

Revenue & Gross Profit Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is faced with the risk of change in consumer preferences and behaviours over time. This may lead to a reduction in product volumes and earnings.

Outlook: The company has raised its full-year 2021 net sales outlook to be in the range of $9.9 billion and $10.1 billion, from the previous guidance range of $9.5 billion to $9.7 billion. It has also upgraded its normalized earnings per share guidance from $1.63 to $1.73.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has declared a quarterly cash dividend of $0.23 per share and is payable on 15 June 2021. The stock of NWL is trading close to its 52-weeks’ high levels of $30.10. The stock of NWL gave a positive return of ~32.25% in the past six months and a positive return of ~108.48% in the past one year. On a technical analysis front, the stock of NWL has a support level of ~$26.430 and a resistance level of ~$30.11. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple), considering the robust growth in core sales, extension of agreement and guidance upgrade. For the purpose, we have taken peers such as Tupperware Brands Corp (NYSE: TUP), Lifetime Brands Inc (NASDAQ: LCUT), Hasbro Inc (NASDAQ: HAS), to name a few. Considering the current high trading levels, recent rally in the stock price and high debt to equity ratio, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the closing price of $28.25, up by ~1.07% as on May 26, 2021.

NWL Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.   

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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