Newell Rubbermaid Inc. (NWL) – the producer of Sharpie pens and Rubbermaid containers – reported first-quarter 2013 adjusted earnings per share of 35 cents, beating the Zacks Consensus Estimate and year-ago quarter earnings of 32 cents. The earnings growth resulted from better operating performance, lower interest expenses and favorable tax rate.
On a reported basis, including special items, the company reported earnings of 19 cents per share compared to 27 cents in the comparable year-ago quarter.
Top-Line and Margin Details
During the quarter, Newell’s net sales declined marginally to $1,240.8 million compared with $1,250.5 million in the prior-year quarter and missed the Zacks Consensus Estimate of $1,327.0 million. Core sales of the company inched up 0.2%, excluding the negative impact from foreign currency translation.
Newell’s quarterly gross profit declined 3.0% year over year to $473.6 million, while gross margin contracted 80 basis points to 38.2%, benefitting from an improved programming in select categories.
Adjusted operating income dipped 4.5% year over year to $138.8 million, while operating margin contracted 40 basis points to 11.2%. During the quarter, the company benefited from the cost savings generated by the Project Renewal initiatives. However, the operating margin comparisons were impacted by the SAP-related timing shift gains in the prior-year quarter.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $174.2 million and long-term debt of $1,699.6 million. Shareholders’ equity was $1,985.1 million, excluding non-controlling interests of $3.5 million.
During the quarter, the company’s capital expenditures came in at $33.6 million and it utilized $123.1 million of cash for operating activities. During the quarter, the company returned $78.3 million to shareholders via a dividend payout of $44.5 million and the repurchase of 1.4 million shares at a cost of $33.8 million.
Fiscal 2013 Guidance
Concurrently, the company provided its outlook for fiscal 2013. Management anticipates core sales growth of 2%–4% and adjusted earnings in the range of $1.78–$1.84 per share for fiscal 2013. Moreover, Newell expects an improvement of up to 20 basis points in operating margin during fiscal 2013.
Moreover, this Zacks Rank #3 (Hold) company expects to achieve its targeted annualized cost savings of $270–$325 million by the second quarter of fiscal 2015 through its Project Renewal program. Moreover, Newell will be saving costs between $90 million – $100 million through its Project Renewal program in the first half of 2013.
The initiative will be funded by savings through reduced structural selling, general and administrative expenses. The Project Renewal initiative will facilitate the company in reducing the complexity of the organization while increasing investments in the most important growth areas within the business.
Further, Newell expects to generate operating cash flow in the range of $575–$625 million in fiscal 2013 with planned capital expenditures between $175 million and $200 million.
Other Stocks to Consider
Other stocks in the consumer staples industry that are worth considering include Flowers Foods Inc. (FLO), Energizer Holdings Inc. (ENR) and Kimberly-Clark Corporation (KMB). Of these, Flower Foods has a Zacks Rank #1 (Strong Buy), while Energizer and Kimberly-Clark carry a Zacks Rank #2 (Buy).
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