Newell Q2 Earnings Beat Estimate on Higher Sales Volume - Analyst Blog

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Newell Rubbermaid Inc. ( NWL ), the producer of Sharpie pens and Rubbermaid containers, posted second-quarter 2014 adjusted earnings of 59 cents a share that surpassed the Zacks Consensus Estimate of 54 cents, and rose 18% year over year. The increase in the bottom line was due to higher sales volume, increase in gross margin and reduced share count.

Newell Rubbermaid Inc - Earnings Surprise | FindTheBest

On a reported basis, including one-time items, the company reported earnings of 54 cents per share, up 45.9% from the prior-year quarter.

This Zacks Rank #2 (Buy) stock's net sales rose 3.1% to $1,521 million from the year-ago quarter and came ahead of the Zacks Consensus Estimate of $1,500 million. Core sales, excluding a negative impact of 150 basis points (bps) from foreign currency translation, climbed 4.6%, reflecting solid sales performance across Writing, Tools and Commercial Products segments.

Writing net sales rose 5.2% to $502.6 million, while core sales increased 8.9%; Tools segment net sales surged 12.3% to $222.3 million, whereas core sales grew 12.9%; and Commercial Products net sales jumped 9.8% to $223.5 million, while core sales grew 9.9%. However, these were partially offset by a decline of 2.6% in Home Solutions net sales of $388.9 million (1.8% fall in core sales).

Newell's gross profit increased 4.4% year over year to $608.4 million, whereas gross margin expanded 50 bps to 40%. Adjusted gross margin increased 80 bps to 40.3% owing to improved productivity and pricing, partly offset by cost inflation.

Adjusted operating income increased 9.2% year over year to $239.8 million while operating margin improved 90 bps to 15.8%.

Other Financial Details

Newell ended the quarter with cash and cash equivalents of $142.7 million, long-term debt of $1,424.2 million, and shareholders' equity of $2,103.6 million.

During the first-half of 2014, the company generated operating cash flow of $4.1 million, incurred capital expenditures of $67 million and paid dividend of $89.8 million. During the quarter, the company bought back 3.9 million shares at $114.3 million.

Reaffirmed Outlook

The company reiterated its full-year adjusted earnings projection of $1.94-$2.00 per share. The company's 2014 adjusted earnings forecast excludes $100-$120 million expenses related to Project Renewal restructuring and other restructuring activities. The current Zacks Consensus Estimate for 2014 is $1.97.

Further, Newell continues to anticipate core sales growth of 3-4% and an improvement of up to 40 bps in the operating margin for 2014.

Newell expects to generate operating cash flow in the range of $600-$650 million in 2014, with planned capital expenditures between $150 million and $175 million.

Moreover, the company finds its targeted annualized cost savings of $270-$325 million by the second quarter of 2015 attainable through its Project Renewal program.

The initiative will be funded by savings generated through reduction of structural selling as well as general and administrative expenses. The Project Renewal scheme will enable the company to reduce the complexities of the organization, while increasing investments in the most important growth areas within the business.

Other Stocks to Consider

Other stocks that warrant a look in the retail space include Citi Trends, Inc. ( CTRN ), Abercrombie & Fitch Co. ( ANF ) and Zumiez, Inc. ( ZUMZ ). All these stocks sport a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ZUMZ , NWL , ANF , CTRN

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