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Newell Soars to a New High

Zacks Equity Research

Shares of Newell Rubbermaid Inc. (NWL) soared to a new 52-week high of $26.11 on Thursday, Mar 28, 2013. The closing price of the producer of Sharpie pens and Rubbermaid containers as on Mar 28 was $26.10, which represented a solid return of 45.2% over the past one year. Average volume of shares traded over the last 3 months stands at approximately 2.986 million. Moreover, the stock currently trades at a forward P/E of 14.3x, at par with the peer group average.

An impressive record of posting better-than-expected bottom-line results, solid top-line  growth, margin improvement, a favorable 2013 outlook, notable return on equity and a reasonably healthy financial position, are the major factors that drove the shares of this Zacks Rank #3 (Hold) company to a new high.

With respect to earnings surprises, Newell has topped the Zacks Consensus Estimates for the past several years, with a trailing four-quarter average surprise of 5.0%. At the same time, an impressive return on equity compared to its peers acts as a catalyst for the stock. It has a 12-month ROE of 24.9%, which is above its peer group average of 21.9%.

In February, the company reported adjusted earnings of 43 cents per share for the fourth quarter of 2012, marginally beating the Zacks Consensus Estimate of 42 cents and year-ago quarter earnings of 40 cents. The earnings growth was a result of the positive impact from pricing and productivity and lower structural selling as well as general and administrative expenses as a percentage of sales.

Net sales inched up 1.6% to $1,518.8 million, surpassing the Zacks Consensus Estimate of $1,514.0 million.

Newell’s quarterly gross profit marginally inched down 0.3% year over year to $555.0 million, while gross margin contracted 70 basis points to 36.5% primarily due to increased investments related to fourth-quarter events. Operating income increased 22.5% year over year to $153.8 million, while operating margin expanded 170 basis points to 10.1%.

Concurrently, the company provided outlook for 2013. Management anticipates core sales growth of 2%–4% and adjusted earnings in the range of $1.78–$1.84 per share for 2013. Moreover, Newell expects an improvement of 20 basis points in operating margin during 2013.

The company expects to achieve its targeted annualized cost savings of $270–$325 million by the second quarter of 2015 through its Project Renewal program. Moreover, Newell will be saving costs between $90 million and $100 million through its Project Renewal program in the first half of 2013.

Besides Newell, other stocks in the retail space that touched all-time highs in the recent weeks are The Clorox Company (CLX), Colgate-Palmolive Co. (CL) and Campbell Soup Company (CPB).

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Read the Full Research Report on CPB

Read the Full Research Report on CLX

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