Newell Brands (NWL) should be looking at a fairly solid day in Friday trading, after posting better than expected third quarter earnings prior to the market open. The company, which has been shedding assets and paying down debt in an effort to recover from its ill-fated acquisition of Jarden in 2016, has been slowly making progress in an attempt to regain its former glory. Formerly known as Rubbermaid , then Newell Rubbermaid after Newell acquired Rubbermaid and Graco in 1999, the stock was once of "widows and orphans" quality.
Third quarter earnings (non-GAAP) of 73 cents handily beat the 56 cent consensus, while revenue of $2.45 billion was $70 million ahead of the consensus. That, by my count, is the seventh consecutive quarter that the company has exceeded earnings expectations.
Perhaps more importantly, the company also upped full-year earnings guidance to $1.63-$1.68, from the previous $1.50-$1.65, and also for operating cash flow from $600-$800 million to $700-$850 million. Sales guidance was also increased to $9.6-$9.7 billion from $9.1-$9.3 billion. NWL further strengthened the balance sheet, reducing debt by $425 million since last quarter. Last week, the company announced that it intends to redeem $300 million worth of its 5% Senior Notes, which mature in 2023. While there were no stock buybacks during the quarter, share count has been reduced by just over 6% since the end of 2018.
One other interesting tidbit in this morning's earnings release; the company has ended its divestiture program, and has decided that it will keep its Rubbermaid Commercial Products business, after previously considering it part of discontinued operations.
NWL shares have been all over the map over this past year, rising above $23 last November, and falling to $13 in May. That's what can happen with reclamation projects - they can be exciting and frustrating depending on the day.
At Thursday's closing price, NWL yielded a healthy 4.85%, and traded at 12x next year's consensus estimates, however, consensus 2020 estimates may shift based on today's report.
Moving forward, I'd like to see NWL continue to pay down debt, repurchase shares, and increase the dividend (which it has not done since May of 2017). That trifecta, however, may be a tall order for a company that won't be generating cash from additional divestitures. Time will tell.
