- 21 марта 2018, 16:49
- Zacks Investment Research
Newell Brands Inc. NWL lost luster lately due to lower core sales, weak margins, adverse pricing and commodity cost inflation, despite reporting better-than-expected results in fourth-quarter 2017. Shares of this Zacks Rank #5 (Strong Sell) company have lost 34.4% in the last six months, much wider than the industry’s decline of 8.9%. The stock also has a Growth Score of D, which questions its growth prospects.
Given this backdrop, Newell’s transformation plan seems to be a blessing in disguise for the stock. The plan focuses on enhancing its operational efficiency and boosting shareholder value, amid a rapidly changing retail backdrop. Meanwhile, the company has been progressing well with the execution of its transformation plan through market share gains, point of sale growth, innovation, e-commerce improvement and cost-savings plans.
Recently, management also expanded its accelerated transformation plan aimed at developing a simpler, faster and stronger company. Additionally, Newell believes that there are more divestiture opportunities, which can yield a total of roughly $10 billion after-tax from the accelerated transformation plan. However, the company retained that it will divest operations at competitive market multiples only.
Furthermore, management reaffirmed continuing the execution of its strategic plans. These initiatives include optimizing its portfolio by focusing on brands with attractive margins and growth potential in global categories; boosting operating efficiency and simplifying operations; enhancing financial flexibility for higher free cash flow and shareholders’ returns; and making the most of Newell’s scale and differentiated capabilities for higher market share gains.
Earlier, the company accelerated the pace of its transformation plan by restricting Newell’s portfolio on nine core consumer segments that can garner nearly $11 billion of sales and $2 billion of EBITDA. Moreover, it is looking for strategic alternatives for assets in its industrial and commercial product as well as smaller consumer businesses. The strategic alternatives for these brands are expected to significantly lower the company’s operational complexity by reducing 50% of its global factory and warehouse presence.
Additionally, these alternatives should reduce the company’s customer base by 50% and result in consolidation of 80% of global sales on two ERP platforms by end of 2019. On completion of these plans, Newell is expected to become a nearly $11 billion focused portfolio company, with leading consumer-facing brands, attractive margins and significant growth potential in global categories.
That said, we believe the transformation plan has the potential to change the fate of Newell, bringing it back on growth trajectory. However, the near-term headwinds might continue to impact the stock’s performance.
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Energizer Holdings, Inc. ENR outpaced the earnings estimates in each of the trailing four quarters by an average of 21.2%. Also, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Blue Buffalo Pet Products, Inc. BUFF has an impressive long-term earnings growth rate of 24% and a Zacks Rank #2 (Buy).
Kimberly-Clark Corporation KMB, also a Zacks Rank #2 stock, has a long-term earnings growth rate of 7.9%.
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