Friday was "hammer time" for the shares of Newell Brands (NWL) , literally as shares were hammered for a 21% drop following the release of fourth quarter earnings. The company's earnings of 71 cents/share were actually 4 cents ahead of the consensus, but revenue of $2.34 billion was off by $90 million. This really was not a bad quarter from a results standpoint. What spooked investors was likely lowered guidance that management issued for 2019 which puts earnings per share in the $1.50-$1.65 range. Management cited a whole host of reasons for trouble, including a strong dollar, tariffs, inflationary pressures, and the Toys R Us bankruptcy's affect on the company's Graco line.
Long disliked by many investors, with the notable exception of Carl Icahn who owned about 9% at year end, Newell has continued to transition, selling off businesses, paying down debt, and buying back shares. Progress here was overshadowed by the less than stellar forward guidance, but the company has made some decent strides to get its house in order.
The sales of Jostens and Pure Fishing were closed during the quarter, which generated after-tax proceeds of $2.5 billion, and the company reduced debt by $2.6 billion from $9.6 billion to $7 billion. It also repurchased $1 billion in stock, and has continued to pay its 23 cent quarterly dividend which equates to a 5.4% yield. There's no reason to believe (in my humble opinion), at this point anyway, that a dividend cut is on the horizon.
Friday's reckoning put an end to a decent year-to-date run, with shares up about 17% prior. The stock still has a way to go to breech its $15.12 recent low hit in late October. However, a great deal of damage was done on Friday - a 21% drop on more than 6 times normal average volume - as investors display little patience for any missteps.
NWL remains a reclamation project, a value investor's special, and requires a special amount of patience. I am encouraged by the steps taken to sell off businesses, pay down debt, and buyback shares, despite the short-term headwinds facing the company. That may be putting lipstick on a pig, but sometimes that comes with the territory.