What's Holding Newell Brands Back

When Newell Brands Inc. (NASDAQ: NWL) released its fourth-quarter financial results before the markets opened on Friday, the firm said that it had $0.71 in earnings per share (EPS) and $2.3 billion in revenue. This compares to consensus estimates from Thomson Reuters that called for $0.67 in EPS and $2.43 billion in revenue, as well as the $0.68 per share and $3.74 billion posted in last year’s fourth quarter.

The drop in revenues that was seen this past quarter reflected headwinds from the adoption of the new 2018 revenue recognition standard, unfavorable foreign exchange and a decline in core sales.

Reported gross margin was 34.7%, compared with 32.7% in the prior-year period, resulting from pricing, productivity, lower integration and restructuring costs and the impact of the new revenue recognition standard.

In terms of its segments the company reported:

  • Learning & Development generated net sales of $707 million, compared with $730 million in the prior-year period.
  • Food & Appliances generated net sales of $824 million, compared with $888 million.
  • Home & Outdoor Living generated net sales of $809 million, compared with $872 million.

Looking ahead to the first quarter, the company is calling for EPS in the range of $0.04 to $0.08 and net sales between $1.66 billion and $1.70 billion. The consensus estimates are $0.22 in EPS and $1.8 billion in revenue.

Michael Polk, president and CEO of Newell Brands, commented:

Newell Brands’ fourth quarter results reflect solid progress as we continue to execute the Accelerated Transformation Plan (ATP) announced one year ago. We were encouraged by the sequential improvement in core sales growth across all segments, the return to growth of our Learning & Development segment driven by building momentum on Writing, and solid margin expansion as a result of continued diligent cost management and pricing. We returned $1.1 billion to our shareholders through dividends and share repurchases and paid down $2.6 billion in debt during the quarter, exiting the year at our targeted leverage ratio. We’ve planned 2019 to be another year of significant portfolio and organization transformation. We intend to drive the ATP to completion in 2019, and despite the ongoing negative impact of retailer bankruptcies, foreign exchange, inflation and tariffs, we expect to stabilize and then reignite core sales growth, increase margins, and strengthen the operational and financial performance of the company.

Shares of Newell were last seen down about 18% at $17.81 on Friday, in a 52-week range of $15.12 to $29.55. The consensus price target is $23.36.