Is This the Final Capitulation for an Elusive Newell Turnaround?
Newell Brands Inc. (NYSE: NWL) is a company for which nothing seems to go right. After multiple earnings disappointments and lower guidance, some investors (even activist investors) have to be wondering if Newell can find a way to dig itself out of the hole. This has become yet another company that faced a firing squad after years of roll-ups into a larger empire that crumbled. Newell Brands has seen its shares continue to fall after reporting absolutely dismal earnings this week. A huge factor in this report was the closure of Toys ‘R’ Us, but that cannot be the whole story as the Toys ‘R’ Us exposure should have been at least somewhat factored into the report.
The company said that it had $0.82 in earnings per share (EPS) and $2.2 billion in revenue. The consensus estimates had called for $0.77 in EPS and revenue of $3.83 billion. Looking ahead to the 2018 full year, the company expects to see EPS in the range of $2.45 to $2.65 and net sales between $8.7 billion and $9.0 billion. These are down from the previous guidance of $2.65 to $2.85 in EPS and $14.4 billion to $14.8 billion in net sales. Consensus estimates call for $2.62 in EPS and $14.24 billion in revenue for the full year.
24/7 Wall St. has tracked multiple analyst ratings and target changes after the earnings report. Unfortunately for Newell’s turnaround ambitions, it seems even the bullish analysts are having a hard time sticking to strong price targets, despite the low valuations.
Citigroup maintained Newell Brands as Buy but cut the target price to $29 from $36.
Wells Fargo still kept an Outperform rating, but it lowered its price target to $33 from $35.
CFRA (S&P) decided to downgrade the shares to Hold from Buy and cut its target to $25 from $32, a capitulation downgrade. The firm now expects 2.9% sales growth in 2019 to be aided by price increases and a recovery in its Baby unit sales as a shift to new retail partners and easier comparisons. CFRA also said that its downgrade reflects recent weakness across all of Newell’s segments.
BMO Capital Markets lowered its target to $25 from $27.
Merrill Lynch maintained a Neutral rating but cut its price objective to $25 from $30.
Jefferies maintained its Hold rating on Newell but cut its target price to $23 from $29.
RBC Capital Markets lowered its target to $24 from $27.
Newell Brands shares were down almost 6% at $20.42 late Wednesday morning, and it had already almost doubled its average daily trading volume of 6.5 million shares. What stands out here is that this isn’t just a 52-week low —Newell Brands has managed to hit yet another multiyear low. It now has a 52-week range of $20.32 to $50.90, and it previously had a consensus analyst price target of $28.58.