Newell Brands Inc. NWL delivered better-than-expected results in first-quarter 2019. However, both the metrics declined year over year.
Newell came up with normalized earnings per share of 14 cents, which significantly outpaced the Zacks Consensus Estimate of 6 cents. However, it plunged 50% from 28 cents earned in the year-ago period.
Net sales declined 5.5% to $1,712.1 million from the year-earlier figure but outshined the Zacks Consensus Estimate of $1,692 million. The year-over-year fall can mainly be attributed to foreign currency headwinds and soft core sales, which dipped 2.4%.
Newell Brands Inc. Price, Consensus and EPS Surprise
Newell Brands Inc. Price, Consensus and EPS Surprise | Newell Brands Inc. Quote
Normalized gross margin contracted 140 basis points (bps) to 31.9%. However, normalized operating margin improved 180 bps to 4.3% in the quarter under review, driven by this Zacks Rank #3 (Hold) company’s cost-containment efforts.
The Learning & Development segment (inclusive of Writing and Baby) recorded net sales of $581 million, which decreased 4.3% from the prior-year number. Unfavorable currency and core sales slipped 1.5%, due to a decline in Baby division induced by the bankruptcy of Toys “R” Us. However, this downside was largely mitigatedby the segment’s Writing division core sales growth.
The Food & Appliances segment’s (Appliances & Cookware Food) net sales slid 5.6% to $504 million. This downtrend can be attributed to negative currency translations and a deterioration of 2.7% in core sales, mainly due to lower promotional activity.
Net sales at the Home & Outdoor Living segment (Outdoor & Recreation, Home Fragrance and Connected Home & Security) totaled $627 million, down 6.4% from the prior-year period. The segment’s top line was hurt by unfavorable currency, core sales decline of 2.9% and the exit of about 60 underperforming Yankee Candle retail outlets.
Newell has made a substantial progress in its Accelerated Transformation Plan announced last January. Also, it has been improving its operational performance through the divestiture of non-core businesses, deleveraging balance sheet and returning cash to its shareholders.
As part of this advancement, the company has concluded divestments of Process Solutions and Rexair businesses for total after-tax sales proceeds of about $735 billion. Further, Newell deployed $97.7 million to pay off dividends in the first quarter.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of $364.1 million, long-term debt of $6,694.6 million and shareholders’ equity of $4,948.4 million excluding non-controlling interests of $34.7 million.
During first-quarter 2019, the company used operating cash flow of $200 million compared with $402 million in the comparable quarter last year.
Management issued guidance for the second quarter and reaffirmed its view for 2019. For 2019, net sales are retained at $8.2-$8.4 billion along with a core sales decline in low single digits. Further, the company anticipates normalized operating margin to expand 20-60 bps. Operating cash flows are projected to be $300-$500 million during the same time frame. Normalized earnings per share are envisioned in the band of $1.50-$1.65 for the year.
For second-quarter 2019, Newell estimates net sales of $2.1-$2.15 billion along with core sales of flat to down 2%. It also anticipates normalized operating margin in the range of flat to down 60 bps. Normalized earnings per share are forecast within 34-38 cents for the quarter.
Shares of the company dropped 32.6% in the past three months against the industry’s 6.5% growth.
Three Better-Ranked Consumer Staples Stocks
General Mills, Inc. GIS pulled off a positive surprise in each of the trailing four quarters, the average being 11.1%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Simply Good Foods Company SMPL delivered average beat of 4.3% in the last four quarters and has a Zacks Rank of 2.
Lamb Weston Holdings, Inc. LW, also a Zacks #2 Ranked player, has an expected long-term earnings growth rate of 12.4%.
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