Newell (NWL) To Report Q2 Earnings: Is A Surprise In Store?

Newell Brands Inc. (NYSE:NWL) is slated to report second-quarter 2016 results on Jul 29, before the opening bell. In the last quarter, the company delivered a positive earnings surprise of 11.1%.

Additionally, Newell Brands has outperformed the Zacks Consensus Estimate by an average of 4% over the past four quarters, with a positive surprise in three of these and in line earnings in one. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Newell Brands has been gaining strength from splendid brand performance along with benefits from the Project Renewal program, which has been leading to persistent cost savings. Further, Newell’s practice of strengthening its portfolio through strategic acquisitions and reducing activities with marginal profitability bodes well.

Encouraged by its solid business trends and completion of the Jarden acquisition, the company issued an impressive outlook for 2016. It expects core sales growth of 3–4% for 2016, including standalone Newell Rubbermaid core sales growth of 4–5% and Jarden core sales growth of 2–4%. Normalized earnings per share are expected in the range of $2.75–$2.90.

However, the company’s earnings continue to be hurt by adverse currency movements, given its significant global presence. Thus, we would wait and see what is in store for Newell in the upcoming release.

Earnings Whispers

Our proven model does not conclusively show that Newell is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Newell is currently pegged at -2.74%. This is because the Most Accurate estimate of 71 cents is below the Zacks Consensus Estimate of 73 cents.

Zacks Rank: Newell carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of -2.74% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

DICK’s Sporting Goods Inc. (NYSE:DKS) , expected to release earnings on Aug 16, 2016, has an Earnings ESP of +5.97% and a Zacks Rank #3.

L Brands Inc. (NYSE:LB) , scheduled to release earnings on Aug 17, 2016 has an Earnings ESP of +8.93% and a Zacks Rank #3.

The Gap Inc. (NYSE:GPS) , expected to release earnings on Aug 18, 2016, has an Earnings ESP of +2.13% and a Zacks Rank #3.