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Shares of Newell Brands Inc. NWL rose more than 5% before the trading session on Oct 29, following impressive third-quarter 2021 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Despite cost inflationary and supply-chain issues, results gained from a solid demand, product innovation and robust core sales growth. Encouragingly, management lifted its 2021 view.
Moving on, the company announced its multi-year initiative, Project Ovid, which aims at transforming its go-to-market capabilities and end-to-end customer experience, enhancing customer service levels and boosting operational efficiencies. It also seeks to optimize its distribution network across the United States via this plan. The move is likely to be implemented in multiple phases over the next 18 months.
This Zacks Rank #3 (Hold) stock gained 5.3% in the past three months against the industry’s 3.6% decline.
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Newell Brands’ third-quarter normalized earnings per share were 54 cents, outpacing the Zacks Consensus Estimate of 50 cents. However, the metric declined 35.7% from 84 cents earned a year ago.
Net sales grew 3.3% year over year to $2,787 million and surpassed the Zacks Consensus Estimate of $2,778 million. The uptick can be attributed to favorable foreign-currency movements and core sales growth of 3.2% as every business unit and key regions witnessed higher core sales. The metric was offset by the adverse impacts of business and retail store exits. Net sales grew 8.5% from the third-quarter 2019 level.
The normalized gross margin contracted 330 basis points (bps) year over year to 30.6%. The normalized operating margin contracted 350 bps to 11.4% year over year.
The Home Appliances segment recorded net sales of $443 million in the third quarter, up 3% from the prior-year quarter’s figure. The upside resulted from the segment’s core sales growth of 1.9% and foreign-exchange tailwinds.
Net sales at the Home Solutions segment (Food, Outdoor products, Home Fragrance, and Connected Home & Security) totaled $598 million, down 36.7% from the prior-year period’s number. The segment’s top line was mainly fueled by a core sales decline of 3.6% due to sluggishness in the Food business, which more than offset the strength in the Home Fragrance unit.
The Learnings and Development segment recorded net sales of $869 million, which grew 19.4% from the prior-year quarter’s reading. The uptrend is led by a 19.6% rise in core sales resulting from strength in both Writing and Baby units.
Net sales in the Commercial Solutions segment were $486 million, down 9.2% from the prior-year period’s number. Core sales declined 9.2% due to drab performance across both Commercial and Connected Home & Security business divisions.
The Outdoor and Recreation segment recorded net sales of $391 million, which increased 2.1% from the prior-year quarter’s level. This resulted from year-over-year core sales growth of 1.7% and foreign-exchange tailwinds.
Other Financial Details
Newell Brands ended the quarter with cash and cash equivalents of $494 million, long-term debt of $4,884 million and shareholders’ equity of $4,057 million, excluding non-controlling interests of $2 million.
For the nine months ended Sep 30, 2021, the company generated $490 million in operating activities. It paid out dividends worth $296 million in the above-mentioned period. The company also redeemed the remaining €300 million of its 3.75 percent senior notes, which were supposed to mature in October 2021. Newell Brands revealed plans to redeem $250 million in November 2021 of its 4% senior notes, which were likely to mature in June 2022. It has liquidity of roughly $2 billion.
Newell Brands Inc. Price, Consensus and EPS Surprise
Newell Brands Inc. price-consensus-eps-surprise-chart | Newell Brands Inc. Quote
Management lifted the 2021 view and issued the fourth-quarter guidance. The company now anticipates 2021 sales at $10.38-$10.46 billion compared with the earlier mentioned $10.1-$10.35 billion. Core sales growth is likely to be 10-11%, up from the prior stated 7-10%. The normalized operating margin is expected to be slightly down compared with the previously communicated 11.1%. Normalized earnings per share are forecast to be $1.69-$1.73 for the year compared with the earlier mentioned $1.63-$1.73.
The Zacks Consensus Estimate for 2021 sales and earnings is currently pegged at $10.39 billion and $1.74, respectively. The company envisions generating an operating cash flow of $1 billion.
For fourth-quarter 2021, net sales are envisioned to be $2.6-$2.68 billion, with core sales down 2% to up 1% year over year. For the quarter, the company expects a normalized operating margin of 8.7-9.2% and normalized earnings of 29-33 cents a share.
The Zacks Consensus Estimate for fourth-quarter 2021 sales and earnings is currently pegged at $2.6 billion and 38 cents per share, respectively.
Better-Ranked Stocks to Consider
Albertsons Companies ACI, a Zacks Rank #1 (Strong Buy) stock at present, has an expected long-term earnings growth rate of 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Helen of Troy HELE currently has an expected long-term earnings growth rate of 8% and a Zacks Rank #2 (Buy).
General Mills GIS currently has an expected long-term earnings growth rate of 7.5% and a Zacks Rank #2.
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