Newell Q3 Earnings Beat - Analyst Blog

By Zacks Equity Research,

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Newell Rubbermaid Inc. ( NWL ) - the producer of Sharpie pens and Rubbermaid containers - reported third-quarter 2013 adjusted earnings per share of 52 cents, beating the Zacks Consensus Estimate of 50 cents as well as 47 cents earned in the year-ago quarter. Results benefited from increased operating income, lower interest expenses and lower tax rate.

On a reported basis, including special items, the company reported earnings of 66 cents per share, compared with 37 cents in the comparable year-ago quarter.

Top-Line and Margin Details

During the quarter, Newell's net sales increased 2.1% to $1,487.2 million, compared with $1,456.9 million in the prior-year quarter. Core sales of the company grew 3.3%, excluding a negative impact from foreign currency translation. However, the company's top line missed the Zacks Consensus Estimate of $1,502.0 million

Newell's gross profit rose 1.1% year over year to $564.0 million, while adjusted gross profit was $566.0 million. Adjusted gross margin expanded 30 bps to 38.1%, benefiting from improved productivity and pricing, largely offset by inflation and favorable mix.

Adjusted operating income increased 4.2% year over year to $216.7 million, while operating margin expanded 30 bps to 14.6%. During the quarter, the company benefited from the cost savings generated by the Project Renewal initiatives in SG&A expenses and better cost leverage with net sales improvement, partially offset by enhanced brand support.

Other Financial Details

Newell ended the quarter with cash and cash equivalents of $197.4 million and long-term debt of $1,671.1 million. Shareholders' equity was $2,189.6 million, excluding non-controlling interests of $3.5 million.

During the third quarter, the company's capital expenditures came in at $28.7 million and generated $360.8 million in cash from operating activities. During the quarter, the company returned $44.0 million to shareholders through dividend payouts and the repurchase of 1.8 million shares for $90.8 million.

Fiscal 2013 Guidance

The company retained its projections for fiscal 2013, guiding adjusted earnings in the range of $1.80-$1.84 per share.

Further, Newell reiterates its core sales growth, normalized operating margin and operating cash flow guidance for fiscal 2013. The company still expects core sales growth of 2%-4% and an improvement of up to 20 bps in the operating margin during fiscal 2013. Newell expects to generate operating cash flow in the range of $575-$625 million in fiscal 2013, with planned capital expenditures between $125 million and $150 million.

Moreover, this Zacks Rank #3 (Hold) company expects to achieve its targeted annualized cost savings of $270-$325 million by the second quarter of fiscal 2015, through its Project Renewal program.

The initiative will be funded by savings through a reduction in 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 are worth considering this earnings season include WD-40 Company ( WDFC ), Energizer Holdings Inc. ( ENR ) and Kimberly-Clark Corporation ( KMB ). Of these, WD-40 carries a Zacks Rank #1 (Strong Buy), while Energizer and Kimberly-Clark hold a Zacks Rank #2 (Buy).

ENERGIZER HLDGS (ENR): Free Stock Analysis Report

KIMBERLY CLARK (KMB): Free Stock Analysis Report

NEWELL RUBBERMD (NWL): Free Stock Analysis Report

WD 40 CO (WDFC): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: ENR , KMB , NWL , WDFC

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