Today we got our first glimpse of the "new" Newell Brands Inc. (NWL) , which this morning reported second-quarter results that for the first time reflect a multitude of completed and planned divestitures.
Newell has completed the sale of The Waddington Group and Rawlings Sporting Goods, but also will be selling a host of other business, including recognizable brands such as Jostens, Goody and U.S. Playing Cards. Adjusted earnings per share of 82 cents beat the 77-cent consensus estimate. However, total revenue of $3.73 billion missed the $3.83 billion consensus. "Core" sales, which exclude divestitures and planned divestitures, however, dropped more than 6%, with Learning & Development down 14.5%.
Newell has struggled in recent years; the stock is down 45% over the past year and currently trades near a five-year low. The business combination of Newell-Rubbermaid with Jarden, announced in late 2015 and completed the following year, created a who's who of brand names but has not worked well. Pressured by activists, including Carl Icahn, who effectively has five seats on the board of directors, the company is well into efforts to raise $10 billion via the sale of some of its businesses.
Clearly a company in transition and enormously disliked by the market, Newell ended the quarter with $2.28 billion in cash and $10.5 billion in debt. Net debt of $8.2 billion is down from $10.6 billion for the same quarter last year, a step in the right direction but still considerable. The company plans to continue paying down debt with divestiture proceeds, but also will be buying back shares, and in June increased its total share repurchase authorization from $1.1 billion to $3.6 billion.
Newell is projecting adjusted earnings per share of between $2.45 and $2.65 for 2018, putting its price-to-earnings (P/E) ratio in the 10 to 11 range. Consensus estimates for next year put the forward P/E at about 9.5.
I am not sure the market will take kindly to today's results, and while this company remains on my radar, I'd like a lower potential entry point.
Newell was one of three potential turnaround/tax-loss selling candidates I identified in early December. It's also the one that has not worked, as it's down 12% since then. The others, Dine Brands Global Inc. (DIN) (up 58%) and Supervalu Inc. (SVU) (up 64%), have done OK, with the latter up big in late July after United Natural Foods Inc. (UNFI) agreed to purchase it for $32.50 a share.