Newell (NWL) Looks Promising: What is Driving the Stock?
Newell Brands Inc. NWL deserves a look as there is no corner which it has left untouched, with regard to growth and excellence. The company’s endeavors have borne fruit, as is reflected by investors’ confidence in the stock. This is further highlighted by the consumer goods company’s solid bull-run as its stock price has jumped 12.4% year to date and 19.5% year over year.
Be it with respect to financial results or strategic growth initiatives, Newell has never disappointed. Starting with its focus on boosting growth via acquisitions, the company remains keen on strengthening its portfolio by investing in its key segments, reducing activities with marginal profitability, and exiting certain businesses and markets.
As evidence, the company recently closed its merger with Jarden Corp., which created a $16 billion entity, prior to which it undertook the buyouts of Elmer’s, Ignite, bubba brands, and others. Also, it sold its Endicia online postage business, its medical cart business, and is on track to sell its Levolor and Kirsch window coverings brands, as part of its efforts to curtail non-performing assets and simplify its portfolio structure.
Further, Newell’s Project Renewal Program, which is aimed at generating cost savings, remains on track. The company, which is currently implementing the third phase of the program, expects annual cost savings from the initiative to approach $700 million by 2017 end or 2018 beginning. This phase is mainly focused on saving costs in the areas of procurement, by reducing the complexity of its business, and simplifying the manufacturing and distribution processes.
These factors have been key contributors to the company’s spectacular earnings history. Notably, Newell has outperformed the Zacks Consensus Estimate in 26 out of the past 28 quarters, by an average of 4% over the trailing four quarters. Moreover, along with its solid first-quarter results, the company issued an impressive outlook for 2016, encouraged by its solid business trends.
Consequently, estimates for 2016 have trended upward and shares have gained 6.6% following the earnings release.
While these factors highlight Newell’s inherent strength, its significant global presence exposes it to adverse currency movements. In first-quarter 2016, the company’s earnings and sales included an impact of nearly 4 cents per share and 230 basis points, respectively, from these currency headwinds. Hence, any prevalence of these headwinds in the future is likely to continue denting results.
Nonetheless, we would like to wait and see if Newell’s strategic initiatives can help it counter these headwinds and add a new chapter to its growth story.
Zacks Rank
Newell currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Blue Buffalo Pet Products, Inc. BUFF, Edgewell Personal Care Company EPC and Ollie's Bargain Outlet Holdings, Inc. OLLI, each carrying a Zacks Rank #2 (Buy).
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