We expect the producer of Sharpie pens and Rubbermaid containers Newell Rubbermaid Inc. (NWL) to beat expectations when it reports third-quarter 2014 results on Oct 31.
Why a Likely Positive Surprise?
Our proven model shows that Newell may beat earnings because it has the right combination of two key components.
Positive Zacks ESP: Newell currently has an Earnings ESP of +1.82%. This is because the Most Accurate estimate stands at 56 cents per share, while the Zacks Consensus Estimate is pegged at 55 cents.
Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have a higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Newell's Zacks Rank #3 and Earnings ESP of +1.82% makes us confident of a positive earnings beat.
What is Driving Better-than-Expected Earnings?
Newell is one of the leading manufacturers of home and office products in the U.S. The company is promptly progressing on its Project Renewal program with about $200 million realized in cumulative savings through the end of fourth-quarter 2013.
Moreover, the company expects to save a cumulative $270 to $325 million annually by the middle of 2015. We believe that Newell’s Project Renewal program will help in reducing the operating costs and complexities of the organization, while increasing investment in core business areas.
In an analyst meet held last month, Newell highlighted the developments on its strategic plans and provided its guidance for the current and next year. On the back of successful implementation of its growth plans, Newell reiterated its outlook for 2014 as it continues to anticipate core sales growth on the lower end of the 3%–4% range, predicted earlier. The company still expects normalized earnings per share (EPS) toward the higher end of the $1.94–$2.00 band.
Further, the company initiated guidance for 2015 projecting core sales to grow between 3.5% and 4%, and a normalized EPS of $2.16–$2.22.
Newell also threw light on its Growth Game Plan progress. Moreover, it provided an update on the strategic plans for innovations, brand development, enhancement of marketing and design capacities, and construction of a solid brand portfolio to speed up growth.
Additionally, the company recently announced its plan to create an international E-commerce center in New York in an attempt to enhance its global online operations. The company plans to introduce more than 30 new posts, including analysts, operation and production specialists for every segment, by hiring highly talented people from the related market. The construction of this E-commerce hub, which is expected to be completed by the end of first-quarter 2015, is likely to speed up Newell’s global online revenue growth.
Newell has topped the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 6.2%. In the last concluded quarter, the company surpassed the Zacks Consensus Estimate by 9.3%.
Other Stocks to Consider
Newell is not the only firm looking up this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:
L Brands Inc.’s (LB) Earnings ESP stands at +3.13% and it carries a Zacks Rank #2 (Buy).
Dean Foods Co. (DF) has an Earnings ESP of +15.39% and a Zacks Rank #3.
Home Depot Inc. (HD) with an Earnings ESP of +0.89% holds a Zacks Rank #3.
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