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Newell (NWL) Beats on Q4 Earnings & Sales, Initiates 2022 View

·6 min read

Newell Brands Inc. NWL reported fourth-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. Management initiated the 2022 view.

Newell Brands’ fourth-quarter normalized earnings per share of 42 cents outpaced the Zacks Consensus Estimate of 33 cents. However, the metric declined 25% from 56 cents earned a year ago.

Net sales grew 4.3% year over year to $2,805 million and surpassed the Zacks Consensus Estimate of $2,659 million. The uptick can be attributed to core sales growth of 5.8%, as six of the eight business units and each key region witnessed higher core sales. Sales were offset by the adverse currency and the exiting of businesses and retail stores.

Newell Brands Inc. Price, Consensus and EPS Surprise

Newell Brands Inc. Price, Consensus and EPS Surprise
Newell Brands Inc. Price, Consensus and EPS Surprise

Newell Brands Inc. price-consensus-eps-surprise-chart | Newell Brands Inc. Quote

The normalized gross margin contracted 280 basis points (bps) year over year to 30.1%. The decline resulted from ongoing inflationary pressures, mainly related to resin, sourced finished goods, transportation and labor, partly negated by gains from FUEL productivity savings and pricing.

The normalized operating margin contracted 150 bps year over year to 9.9%, driven by significant cost inflation, which offset the gains from reduced overhead costs, FUEL productivity savings and pricing.

The Zacks Rank #3 (Hold) stock lost 9.4% in the past three months compared with the industry’s 16.2% decline.

Zacks Investment Research
Zacks Investment Research

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Segment Details

Net sales in the Commercial Solutions segment were $503 million in the fourth quarter, up 1% from the prior-year period’s number. Core sales improved 1.7%, driven by gains across both Commercial and Connected Home & Security business divisions. This was partly offset by adverse currency rates.

The Home Appliances segment recorded net sales of $541 million in the fourth quarter, up 4.4% from the prior-year quarter’s figure. The upside resulted from the segment’s core sales growth of 5.6%, offset by foreign-exchange headwinds.

Net sales at the Home Solutions segment (Food, Outdoor products, Home Fragrance, and Connected Home & Security) totaled $759 million, up 0.7% from the prior-year period’s number. The segment’s top line was mainly fueled by core sales growth of 3.2%, offset by the closure of 99 underperforming Yankee Candle stores. Core sales benefited from growth in the Home Fragrance business unit, offset by a modest decline in the Food business unit.

The Learning and Development segment recorded net sales of $698 million, which grew 4.2% from the prior-year quarter’s reading. The uptrend is led by a 5.3% increase in core sales, resulting from strength in the Writing business, offset by a decline in the Baby business. Adverse currency rates also affected the segment’s sales in the quarter.

The Outdoor and Recreation segment’s net sales of $304 million improved 22.1% from the prior-year quarter’s level. This resulted from core sales growth of 23.9%, offset by foreign-exchange headwinds.

Other Financial Details

Newell Brands ended 2021 with cash and cash equivalents of $440 million, long-term debt of $4,883 million, net debt outstanding of $4.4 billion, and shareholders’ equity of $4,091 million, excluding non-controlling interests. As of the year-end, the company had a strong liquidity position, with $2 billion in available short-term liquidity, including cash on hand.

In the fourth quarter, the company redeemed the remaining $250 million of its 4% senior notes, which were supposed to mature in June 2022.

In 2021, the company generated $884 million in operating activities. It paid out dividends worth $394 million in 2021.

Outlook

Management provided its initial guidance for 2022. The company anticipates net sales of $9.93-$10.13 billion for 2022, with core sales of flat to up 2%. The normalized operating margin is expected to be 11.5-11.8%. Normalized earnings per share are forecast to be $1.85-$1.93 for 2022.

For 2022, the company envisions generating an operating cash flow of $800-$850 million.

For first-quarter 2022, net sales are envisioned to be $2.25-$2.30 billion, with core sales growth of 2-4%. For the quarter, the company expects a normalized operating margin of 8.9-9.3% and normalized earnings of 26-28 cents per share.

Better-Ranked Stocks to Consider

We have highlighted three better-ranked companies in the Consumer Staples space, namely Albertsons Companies ACI, Franchise Group FRG and Leslies LESL.

Albertsons Companies, one of the largest food and drug retailers in the United States, presently sports a Zacks Rank #1 (Strong Buy). Shares of ACI have risen 18.4% in the past three months. ACI has an expected EPS growth rate of 8% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Albertsons Companies’ sales for the current financial year suggests growth of 1.6%, while that for earnings suggests a decline of 9% from the year-ago reported levels. ACI has a trailing four-quarter an earnings surprise of 31.6%, on average.

Franchise Group, based in Delaware, OH, is a retailer, franchisor operator, and acquirer of franchised and franchisable businesses. The company presently flaunts a Zacks Rank #1. FRG has rallied 10.5% in the past three months. It has an expected EPS growth rate of 15% for three to five years.

The Zacks Consensus Estimate for Franchise Group’s sales and EPS for the current financial year suggests growth of 88.2% and 140.5%, respectively, from the year-ago reported levels. FRG has a trailing four-quarter negative earnings surprise of 29.7%, on average.

Leslies, a direct-to-consumer pool and spa care brand in the United States, presently has a Zacks Rank #2 (Buy). Shares of LESL have declined 11.9% in the past three months. It has an expected EPS growth rate of 9.1% for three to five years.

The Zacks Consensus Estimate for Leslies’ sales and EPS for the current financial year suggests respective growth of 12.7% and 18.8% from the year-ago reported figures. LESL has a trailing four-quarter earnings surprise of 27.9%, on average.


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