Newell (NWL) Beats On Q4 Earnings & Sales, Retains FY18 View

Newell Brands Inc. (NYSE:NWL) delivered fourth-quarter 2017 results, wherein both earnings and sales surpassed the Zacks Consensus Estimate. However, decline in both top and bottom line did raise some concerns. Nevertheless, management retained its 2018 view.

This Hoboken, NJ-based company posted normalized earnings of 68 cents per share that beat the Zacks Consensus Estimate by a penny but declined 15% year over year from 80 cents reported in the prior-year quarter. Management highlighted that lost contributions from divested operations, fall in core sales volume, adverse pricing, and commodity cost inflation coupled with increased share count hurt the bottom line. These were partly mitigated by ongoing cost savings and related synergies, contributions from acquisitions and lower tax rate.

Net sales of $3,743.1 million came ahead of the Zacks Consensus Estimate of $3,716 million but declined 9.5% year over year on account of the adverse impact from divestitures, net of buyouts. Core sales fell 1.9%. E-commerce sales worldwide surged more than 25% during the quarter under review, and now represent 11% of net sales.

Normalized gross margin contracted 420 basis points to 33% during the quarter. Meanwhile, normalized operating margin shriveled 290 basis points to 13.4% in the quarter under review.

We noted that shares of Newell are up roughly 2.6% during pre-market trading session following better-than-expected results. However, shares of this Zacks Rank #5 (Strong Sell) company have declined 44.9% in the past six months, wider than the industry’s decline of 11.6%.

Segment Performance

Live segment net sales increased 2.7% to $1,724.8 million from the year-ago period. However, core sales decreased 1.8% on account of soft results from Appliances and Baby, partly offset by growth in Home Fragrance and Fresh Preserving.

Net sales at Learn segment came in at $551 million, down 8.9% from the prior-year period. Core sales fell 9.7% due to double-digit decline in Writing, partially offset by growth from Jostens.

Work segment net sales of $705 million declined 3% year over year. Core sales decreased 1.2% on account softness witnessed in the Consumer and Commercial Solutions business, partly offset by growth from Waddington and Safety & Security.

Net sales at the Play segment came in at $563 million, up 6.6% from the prior-year period. Core sales rose 5.4% due to sturdy growth registered in Coleman, Contigo, Marmot and Team Sports partly offset by declines in Fishing.

The Other segment net sales of $198 million plunged 66.7% from the prior-year period on account of the divestitures of the Tools, Winter Sports, Fire Starter and Fire Log, and Cordage businesses. Core sales declined 0.8% due to weakness in Home & Family, partly offset by growth in the Process Solutions business.

Other Financial Details

Newell ended the quarter with cash and cash equivalents of $485.7 million, long-term debt of $9,889.6 million and shareholders’ equity of $14,144.7 million, excluding non-controlling interests of $36.6 million. The company lowered debt load by $1.4 billion in 2017.

The company generated operating cash flow of $990 million compared with $992 million in the prior-year period. During the quarter, the company returned $264 million to shareholders in the form of dividends and share buyback.

Outlook

Management continues to project normalized earnings per share in the band of $2.65-$2.85, and envisions operating cash flow in the range of $1.15-$1.45 billion for 2018. The current Zacks Consensus Estimate for the year is pegged at $2.75.

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