Here's Why Newell's (NWL) Strategic Efforts Appear Encouraging

Newell Brands Inc. NWL appears well poised for growth on the back of its robust business strategies. Management has been evaluating opportunities to optimize the category mix and drive growth within each business unit.

The company is on track to leverage its robust e-commerce capabilities to aid overall growth. In the past three months, shares of the Zacks Rank #3 (Hold) company have risen 8.9% compared with the industry’s 3.2% growth.

Let’s Delve Deep

Newell is undertaking significant actions to accelerate productivity and efficiency through productivity plans, driving automation and fully implementing Project Ovid. Increased focus on revenue-growth management, aggressive efforts to reduce SKU as well as supply-network optimization bode well. It is also focused on stringent cost-cutting plans such as right-sizing overhead costs and others.

The company’s efforts to rightsize the manufacturing labor force across selected sites resulted in $50 million in annualized cost savings. During fourth-quarter 2023, the normalized gross margin expanded 570 basis points (bps) year over year, driven by gains from the productivity program and pricing actions. The normalized operating margin increased 280 bps year over year in the reported quarter.

Post the successful completion of the first phase of Project Ovid, NWL has announced Network Optimization Project, which aims to simplify and streamline its North America distribution network. The initiative is expected to be implemented by the end of 2024. The company expects to realize annual pre-tax savings of $25-$35 million post the implementation.

Newell Brands Inc. Price and Consensus

Newell Brands Inc. Price and Consensus

Newell Brands Inc. price-consensus-chart | Newell Brands Inc. Quote

Management also continues to strengthen its e-commerce business via increased investments and better customer engagement. It had earlier launched buy online and pick up in stores as well as ship from store facilities in its Yankee Candle retail stores, which have been doing well.

Newell also came up with a restructuring and savings initiative, Project Phoenix, which aims at reducing overhead costs, streamlining the operating model, centralizing supply-chain functions and increasing efficiencies. The company has announced the project to simplify and strengthen itself by optimizing cost and increasing efficiency. It is on track to achieve the headcount reduction associated with Project Phoenix, along with annualized pre-tax savings of $220-$250 million after full implementation.

After the implementation of Project Phoenix, Newell is likely to realize annualized pre-tax savings of $220-$250 million. We note that the combined savings from Project Phoenix and organizational realignment will more than offset professional wage and benefit inflation, and several incremental investments to enhance the critical core capabilities.

The company has unlocked more than $150 million of pretax savings through Project Phoenix, which helped ease the inflationary pressures on overheads. On the SG&A front, meaningful savings were realized with Project Phoenix, providing $53 million of gains in the fourth quarter of 2023.

Stocks to Consider

Some better-ranked stocks from the same industry have been discussed below.

The Chef’s Warehouse CHEF, which engages in the distribution of specialty food products, currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 3.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal-year sales and earnings implies growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently carries a Zacks Rank of 2. VITL has a trailing four-quarter average earnings surprise of 155.4%.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings implies growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.

Utz Brands Inc. UTZ, which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 2.6%, on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings indicates growth of 15.8% from the year-ago reported numbers.

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Newell Brands Inc. (NWL) : Free Stock Analysis Report

The Chefs' Warehouse, Inc. (CHEF) : Free Stock Analysis Report

Vital Farms, Inc. (VITL) : Free Stock Analysis Report

Utz Brands, Inc. (UTZ) : Free Stock Analysis Report

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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.

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