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Newell Up More Than 32% in 3 Months: What's Driving the Stock?

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Zacks Equity Research
·3 min read
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Shares of Newell Brands Inc. NWL have gained 32.3% in the past three months, outperforming the industry’s growth of 1.2%. The stock’s bullish run on the bourses can be attributable to steady bottom-line performance. Notably, second-quarter 2020 marked the fourth straight quarter of earnings beat. Results benefited from an improving top-line trend and robust consumption patterns despite the challenging economic situation surrounding the coronavirus outbreak.

With consumers increasingly shifting to the online platform due to the ongoing COVID-19 pandemic, Newell witnessed double-digit online growth for yet another quarter. This positive trend is likely to continue in the near term. Further, the company is witnessing sales growth in a few categories, stemming from the ongoing crisis. This reflects that consumer preference has shifted to certain products, owing to which the company’s Food, Commercial, Appliances & Cookware and Outdoor & Recreation categories are benefiting.

Moreover, management is progressing well with its Project FUEL plan for 2020 that focuses on enhancing productivity in a bid to offset revenue declines. The company is working toward increasing efficiency in manufacturing plants, procurement and distribution centers. Also, it plans to leverage its robust e-commerce capabilities, which have remained strong for some time now.

However, it has been witnessing soft core sales for the past few quarters. In second-quarter 2020, core sales dropped 12.6%, led by declines in Learning & Development, Home & Outdoor Living, Commercial Solution, and Outdoor and Recreation segments. Additionally, soft core sales and foreign currency headwinds weighed on the company’s overall top line in the second quarter, which declined 14.9% on a year-over-year basis. Apart from these, Newell Brands withdrew its 2020 outlook due to uncertain COVID-19 impacts such as supply-chain disruptions, soft demand and macroeconomic headwinds.

Bottom Line

Although sluggish core sales and uncertain COVID-19 impacts remain concerns, the Project FUEL plan and the shift in consumption patterns are likely to act as key catalysts for this Zacks Rank #2 (Buy) stock in the near term. In fact, the stock’s VGM Score of A reflects its inherent strength. Also, it is hovering close to its 52-week high of $17.03, which further raises optimism in the stock.

3 More Stocks to Watch

TreeHouse Foods THS currently has an expected long-term earnings growth rate of 7.7% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Helen of Troy Limited HELE currently has an expected long-term earnings growth rate of 6.5% and a Zacks Rank #2.

Campbell Soup Company CPB has a long-term earnings growth rate of 8.3% and a Zacks Rank #2.

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