Newell Rubbermaid Inc. (NWL), the producer of Sharpie pens and Rubbermaid containers, reported first-quarter 2012 adjusted earnings per share of 33 cents, up 13.8% from 29 cents in the year-ago quarter, outpacing the Zacks Consensus Estimate of 31 cents.
The earnings growth was driven by positive impact from increased sales volume, lower structural selling, general and administrative expenses as a percentage sales and lower effective tax rate, partially offset by higher input cost inflation. On a reported basis, including special items, the company reported earnings of 27 cents per share, up 8% from the year-ago quarter.
Top-Line and Margin Details
During the quarter, Newell recorded a year-over-year growth of 4.6% in net sales to $1,332.4 million. Core sales of the company contributed 5.2%, excluding negative impact of 60 basis points (bps) from foreign currency translation. The growth was primarily driven by a sales increase of 9.2% and 21.2% in the company’s Newell Professional and Baby & Parenting Essential categories, respectively. Moreover, net sales surpassed the Zacks Consensus Estimate of $1,300 million.
Newell’s quarterly gross profit rose 5.3% year over year to $510.6 million, while gross margin expanded 20 basis points to 38.3% primarily driven by lower cost of goods sold as a percentage of net sales. Operating income increased 5.6% year over year to $124.2 million, and operating margin expanded 10 basis points to 11%, primarily due to gross margin expansion and lower structural selling, general and administrative expenses.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $190.1 million and long-term debt (including the current maturities) of $1,816.2 million. Shareholders’ equity was $1,947.3 million excluding non controlling interests of $3.5 million.
During the quarter, the company’s capital expenditure came in at $48.3 million, generating a negative free cash flow of $95.7 million.
Fiscal 2012 Guidance
Based on expectations of core sales growth of 2% to 3%, management expects adjusted earnings in the range of $1.63 to $1.69 per share for fiscal 2012. Moreover, Newell anticipates an improvement of 20 basis points in operating margin during fiscal 2012
Moreover, the company expects an incremental annual net income in the range of $55 to $65 million from fiscal 2012 through its European Transformation Plan. Moreover, Newell will be saving costs in between $90 and $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. Project Renewal initiative will facilitate the company in reducing the complexity of the organization while increasing investments in most important growth areas within the business.
Further, Newell expects to generate operating cash flow in the range of $500-$600 million in fiscal 2012 with planned capital expenditures in between $200 million and $225 million.
Newell Rubbermaid is one of the leading manufacturers of home and office products in the U.S. The company also possesses a strong portfolio of widely popular brands, such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. Leveraging its strong brand equity, Newell Rubbermaid expects modest earnings going ahead, provided the market scenario improves.
The company faces intense competition from numerous manufacturers and distributors of consumer and commercial products, such as Jarden Corp. (JAH), Beam Inc. (BEAM), Cooper Industries plc (CBE), and Avery Dennison Corporation (AVY).
Newell Rubbermaid currently has a Zacks #4 Rank, implying a short-term 'Sell' rating on the stock. Besides, the company retains a long-term 'Neutral' recommendation.
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