Factors Likely to Decide Newell's (NWL) Fate in Q2 Earnings

Newell Brands Inc. NWL is slated to report second-quarter 2020 results on Jul 31, before the opening bell. Although the Zacks Consensus Estimate for second-quarter earnings has increased 2 cents to 15 cents over the past 30 days, the same suggests a plunge of 66.7% from the year-ago quarter’s tally. Further, the consensus mark for quarterly revenues is pegged at $1,959 million, indicating 7.4% decline from the figure reported in the year-ago quarter.

However, the Atlanta, GA-based company’s earnings have outperformed the Zacks Consensus Estimate in the trailing four quarters by an average surprise of 28.3%.

Key Factors to Note

Newell has been witnessing lower core sales for a while. Further, we expect COVID-19 to have a profound impact on its second-quarter performance. Management at its first-quarterearnings callon May 1 said that retail store closures and supply chain disruptions will hurt its second-quarter results. We note that any softness in Writing, Home Fragrance, and Outdoor & Recreation categories are likely to show on the company's quarterly performance.

Also, the company projects that significant revenue decline in the soon-to-be-reported quarter is likely to put pressure on operating margin owing to deleveraged fixed cost in spite of the company’s cost-containment efforts. Adverse foreign currency translations remain added deterrents.

However, the company’s Food and Commercial segment has been benefiting as consumer preference has shifted to certain products. This, along with a positive sales trend in the Appliances & Cookware business in the United States, might have aided second-quarter results. Meanwhile, Newell’s FUEL initiative to boost productivity and e-commerce-enhancing efforts look encouraging. These positives might have cushioned the quarter to some extent.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Newell this reporting cycle. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re  reported with our Earnings ESP Filter.

Newell Brands Inc. Price and EPS Surprise

Newell Brands Inc. price-eps-surprise | Newell Brands Inc. Quote

Newell carries a Zacks Rank #3 and an Earnings ESP of +0.31%.

More Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Sprouts Farmers Market SFM currently has an Earnings ESP of +2.63% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clorox CLX presently has an Earnings ESP of +0.59% and a Zacks Rank #2.

Kellogg K presently has an Earnings ESP of +1.23% and a Zacks Rank #3.

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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 Nasdaq, Inc.