Personal Finance

Why Shares of Newell Brands Plummeted Today

A multicolored set of Rubbermaid containers.

What happened

Shares of Newell Brands (NYSE: NWL) were taking a dive today after the household-products maker posted another disappointing round of results in its fourth-quarter earnings report; sales slipped, and the company offered weak guidance in 2019. Consequently, the stock was down 19% as of 11:28 a.m. EST.

So what

Newell, which owns a number of well-known brands including Rubbermaid containers, Elmer's glue, and Sharpie markers, said overall revenue from continuing operations fell 6% to $2.34 billion, worse than analyst expectations at $2.43 billion. Foreign currency headwinds, the new revenue recognition standard, and a 1.2% decline in core sales weighed on performance.

A multicolored set of Rubbermaid containers.

Image source: Newell Brands.

Management did note that core sales improved in all categories sequentially, and adjusted operating margin increased 70 basis points to 11.4% with the help of higher prices and production efficiencies, and the company also took a $157 million asset impairment charge.

Adjusted earnings per share increased from $0.68 to $0.71, which topped estimates at $0.67. However, investors seemed to focus on the ongoing impairment charges, which underscored structural challenges within the company.

Highlighting the company's progress in its turnaround plan, CEO Michael Polk said, "We were encouraged by the sequential improvement in core sales growth across all segments, the return to growth of our Learning & Development segment driven by building momentum on Writing, and solid margin expansion as a result of continued diligent cost management and pricing."

Now what

Newell also issued a disappointing outlook for the current year, saying it sees a low-single-digit core sales decline and overall revenue of $8.2 billion to $8.4 billion, much less than the consensus estimate at $8.78 billion. Newell's guidance takes into account the sale of its Pure Fishing and Jostens brands, announced in November 2018, for about $2.5 billion.

It also forecast adjusted EPS of $1.50 to $1.65, which is down significantly from $2.68 last year and much worse than the analyst view at $2.14. Polk said it would be another transitional year, adding: "We've planned 2019 to be another year of significant portfolio and organization transformation. We intend to drive the Accelerated Transformation Plan to completion in 2019, and despite the ongoing negative impact of retailer bankruptcies, foreign exchange, inflation and tariffs, we expect to stabilize and then reignite core sales growth, increase margins, and strengthen the operational and financial performance of the company."

Given the sharply lower earnings forecast and the company's structural problems, it's not surprising to see the stock tumbling today.

10 stocks we like better than Newell Brands

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Newell Brands wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of January 31, 2019

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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

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

In This Story


Other Topics


Latest Personal Finance Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More