Earnings season is upon us once again, and as a value investor, this represents progress report time for those names that are seemingly in turnaround mode. This morning, Newell Brands (NWL) , which has been attempting to right its ship the past couple of years via asset sales and debt pay down, reported better than expected fourth quarter earnings.
Revenue of $2.62 billion was ahead of the consensus by $40 million, whiles earnings per share of 42 cents were 3 cents better than estimates. The company completed the sale of its U.S. Playing Card Company business at the end of the quarter for $112 million. That apparently represents the last of the business and asset sales that were the cornerstone of its "Accelerated Transformation Plan". Over the past couple of years NWL has sold sporting goods business Rawlings, its Waddington plastic packaging business, Pure Fishing, Jostens (jewelry), Process Solutions, Rexair, and Goody Products.
The asset sales have allowed NWL to pay down debt, which ended the quarter at $5.7 billion. That's less than half of what it was ($11.9 billion) at year-end 2016, following the ill-fated combination with Jarden. Debt was reduced by about $600 million during the quarter. The company has also been buying back stock, and has reduced shares outstanding by 15% over the past two years.
Company guidance for 2020 puts earnings per share in the $1.46-$1.56 range, which implies a forward price earnings ratio in the 12.5-13.5 area. The consensus estimate for 2020 prior to this morning's earnings release was at the high end of that range, $1.55. However, first quarter company guidance of 3 to 5 cents is below the previous 13 cent consensus. With the market's focus on the short-term, that may temper today's action in the stock.
The "new" version of NWL is still comprised of a host of well-known brand names including Sharpie, Paper Mate, and Elmer's (Writing business), Calphalon, Sunbeam, CrockPot, Oster and Mr. Coffee (Appliances & Cookware), Coleman, Steans, and Contigo (Outdoor & Recreation), Graco and bay jogger (Baby), Yankee Candle and Chesapeake Bay Candle (Home Fragrance), FoodSaver, Rubbermaid and Ball (Food), First Alert, BRK, and Onelink (Connected Home Security), and Quickie and Spontex (Commercial).
NWL currently yields a healthy 4.7%, but that dividend has remained at 23 cents/quarter for the past three years, and there's little to no reason to believe that it will be raised anytime soon.
