Newell's (NWL) Chesapeake Bay Candle Buy To Boost Portfolio

Newell Brands Inc. (NYSE:NWL) has agreed to acquire Chesapeake Bay Candle in a $75-million deal. Subject to working capital adjustments and certain closing conditions, the transaction is expected to close in the fourth quarter of 2017. The company plans to fund the acquisition mainly using its cash in hand.

Chesapeake Bay Candle, being one of the market leaders in manufacturing and marketing of premium candles, will be a valuable addition to Newell’s portfolio. In order to strengthen candle business, Newell had also acquired WoodWick fragranced candles business during the first quarter of 2017. Contributions from the WoodWick acquisition had favorably impacted sales during the second quarter.

These acquisitions are in line with the company’s Growth Game Plan, whereby it makes prudent investments in areas with high growth potential. On similar grounds, the company also acquired the Sistema food storage business during the first quarter, which resulted in top-line expansion.

On Track with Growth Efforts

In addition to strategic acquisitions, Newell is also devoted toward simplifying its operating structure. Accordingly, during the first quarter it undertook the divestiture of four of its businesses namely — tools, consumer storage totes, fire building and fire starting, and the rope and chain business.

Further, the company has an agreement in place to divest Teutonia, its central European baby gear business. It is on track with its plan of exiting product lines with annual sales of $200-$300 million across its combined business with Jarden, over the next two to three years. Newell’s Project Renewal Program is also on schedule, and the company expects annual cost savings from this program to approach $700 million by 2017 end or 2018 beginning.

Guidance Tweaked on Impacts of Hurricane Harvey

Newell recently trimmed earnings guidance for 2017 on increased inflationary pressures due to lower resins supply. The decline in supply was caused by the impact of Hurricane Harvey. Normalized earnings are now envisioned in the band of $2.95 to $3.05 per share versus the previous expectation of $3.00 to $3.20. However, net sales and core sales guidance remain intact.

The effects of Harvey have significantly disrupted huge parts of the United States’ resin manufacturing supply chain, significantly raising operating costs. Further, these resin supply issues and increased inflation is likely to persist through the rest of 2017 and in 2018.

The impact of such challenges is visible on the company’s share price performance. Newell’s shares have gone down 11.8% in the past one month, wider than the industry’s decline of 2.1%

Despite the headwinds concerning resin supply, Newell is expected to continue delivering growth on the back of savings and acquisition related initiatives. Management also expects to boost performance in the second half backed by new distribution gains, a strong pipeline of innovations and e-Commerce strength.

Currently, Newell carries a Zacks Rank #3 (Hold).

Looking for More? Check These Consumer Staples Stocks

Investors may also consider better-ranked stocks such as Estee Lauder Companies, Inc. (NYSE:EL) , flaunting a Zacks Rank #1 (Strong Buy) as well as Nu Skin Enterprises, Inc. (NYSE:NUS) and Constellation Brands, Inc. (NYSE:STZ) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Estee Lauder delivered an average positive earnings surprise of 13.7% in the trailing four quarters. It has a long-term earnings growth rate of 12.2%.

Nu Skin delivered an average positive earnings surprise of 10.8% in the trailing four quarters. It has a long-term earnings growth rate of 8.7%.

Constellation Brands delivered an average positive earnings surprise of 11.7% in the trailing four quarters. It has a long-term earnings growth rate of 18.2%.

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