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Here's Why You Must Add Newell Brands (NWL) to Your Portfolio

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  • NWL

Newell Brands, Inc. NWL seems an appropriate investment option at the moment as it remains well-positioned to grow on the back of favorable customer demand across all categories and regions. Moreover, the company remains focused on SKU reduction efforts, Project FUEL and other cost-cutting actions.

Shares of this Zacks Rank #2 (Buy) company have rallied 18.9% in the past three months, outperforming the industry’s growth of 1.9%. It has also outperformed the Consumer Staples sector’s growth of 12.3%.

That said, let’s delve into the factors that make Newell a promising bet.

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Zacks Investment Research

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Factors Driving the Stock

Newell has been gaining from solid demand across all business units and regions along with enhanced supply-chain operations and robust consumption patterns. This resulted in better-than-expected results for first-quarter 2021, wherein earnings and sales improved year over year. Notably, it recorded the seventh straight quarter of earnings beat. Robust performance in Home Fragrances and Home Appliances businesses along with an improvement in the Writing business contributed to quarterly growth.

Encouragingly, management raised the 2021 view and issued an upbeat second-quarter guidance. The company now anticipates 2021 sales of $9.9-$10.1 billion versus the earlier view of $9.5-$9.7 billion. Core sales growth is likely to be 5-7%. Normalized earnings now are forecasted at $1.63-$1.73 per share, which indicates an improvement from $1.55-$1.65 expected earlier.

For second-quarter 2021, the company expects normalized earnings of 41-45 cents, with operating margin expansion of 130-180 bps to 11.5-12%. Further, net sales are envisioned to be $2.5-$2.58 billion, with core sales witnessing growth of 17-20%. The Zacks Consensus Estimate for 2021 earnings of $1.73 per share has increased 5.5% in the past 30 days.

Apart from these, it is progressing well with its Project FUEL plan that focuses on enhancing productivity, improving pricing and other cost-cutting efforts in a bid to aid revenues. Also, it plans to leverage its robust e-commerce capabilities, which have remained strong for some time now. With continued strength in the online platform, Newell witnessed double-digit growth online in the first quarter of 2021. This positive trend is likely to continue in the near term.

Hurdles on the Way

Despite such upsides, the company has been witnessing raw-material inflation along with higher labor and freight costs stemming from the COVID-19 crisis. Elevated expenses have been weighing on Newell’s gross margin. Also, the first quarter top line reflected adverse impacts from unfavorable foreign currency movements.

Bottom Line

All said, we believe that strength in demand, driven by robust consumption patterns and enhanced e-commerce capabilities, is likely to help offset cost headwinds and keep Newell’s positive momentum going. Moreover, the stock boasts a VGM Score of A.

Other Top Food Picks

Darling Ingredients DAR, a Zacks Rank #1 (Strong Buy) stock, has a trailing four-quarter earnings surprise of 9.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medifast, Inc. MED, currently carrying a Zacks Rank #1, has a trailing four-quarter earnings surprise of 12.7%, on average.

Nomad Foods NOMD, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 10.3%, on average.

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Newell Brands Inc. (NWL) : Free Stock Analysis Report

Darling Ingredients Inc. (DAR) : Free Stock Analysis Report

MEDIFAST INC (MED) : Free Stock Analysis Report

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