One of Friday's biggest surprises was from Newell Brands (NWL) , a company that just can't seem to catch many breaks these days. Shares rose nearly 15% after the company released third quarter earnings before the market opened. The company reported better than expected "adjusted" earnings per share of 81 cents, which exceeded consensus estimates of 65 cents. Revenue of $2.28 billion narrowly missed the consensus forecast by $60 million.
Driving Friday's uptick was improved full year earnings guidance for 2018, as the company upped expected earnings from $2.45-$2.65 to $2.55-$2.75, better than the $2.47 consensus.
The markets and most investors (besides activist investor Carl Icahn, who has amassed an 8.1% stake in the name) have been sour on NWL, which is down more than 35% year to date, and currently trades near a six year low. The company is still trying to dig its way out of the 2015 acquisition of Jarden, and has been selling off businesses to pay down debt and right the ship.
So far in 2018 NWL has sold off The Waddington Group, consumer and commercial package manufacturing business for $2.3 billion, Rawlings Sporting Goods for an estimated $395 million, and Goody Products (undisclosed amount). These moves allowed the company to pay down debt by $900 million last quarter; it's also down about $2.5 billion over the past year. NWL ended the quarter with about $9.6 billion in debt, and there's still work to be done there.
There was speculation in September that the company's playing card business (United States Playing Cards) would be sold, and last week came reports that its Jostens class ring unit would be sold for $1.3 billion. On Friday's earnings call, the company acknowledged that both businesses are in play, in addition to the company's Pure Fishing business.
NWL intends, through all of its divestitures, to generate $10 billion in after-tax proceeds that it will combine with operating cash flow to continue paying down debt, and to buy back shares. The company did put its money where its mouth is to that end, and repurchased 19 million shares during the quarter. I hope to see more of that. A dividend increase combined with buybacks and debt pay downs might send a positive signal to markets, but that may be asking for too much, at least at this point.
NWL clearly has more work ahead of it, but remains intriguing at 8 X next year's consensus estimates, and yielding an attractive 4.8%, to those with strong stomachs that are willing to go against the mainstream.