We issued an updated research report on Newell Rubbermaid Inc. NWL on Jun 2, 2015.
Newell Rubbermaid has a strong portfolio of well-established brands, such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. This strength of its portfolio should take the company forward despite economic headwinds.
Apart from this, the company has been trying to reduce its expenses through its Project Renewal Program. Newell Rubbermaid expects annualized cost savings from the program to be about $620 million to $675 million by 2017 end. The company intends to use a major portion of these savings to accelerate growth.
Together with this, the company is trying to further boost its portfolio by investing in the key segments, reducing activities with marginal profitability and pursuing acquisitions. We expect these steps to help the company to be a more profitable company in the long run.
Although Newell generates most of its revenues and profits from its domestic operations, the company has significant presence in the global market. This international presence exposes the company to adverse foreign currency exchange rates, which could negatively impact its operations.
In fact, in first-quarter 2015, the company’s earnings included an impact of nearly 8 cents from these currency headwinds. Though the company reiterated its adjusted earnings forecast for 2015, it now expects forex to have a negative impact of 35–37 cents on earnings per share in 2015. This marks an increase of 4 cents from the previous guidance as the U.S. dollar continues to gain strength in comparison to other currencies.
Moreover, the company is heavily dependent on a handful of customers, including large discounters, department stores, home centers, warehouse clubs, and office superstores whose bargaining strength reduces Newell Rubbermaid’s pricing power. This exerts pressure on margins and limits profitability.
Newell Rubbermaid currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
A better-ranked stock in the same industry is Kimberly-Clark Corp. KMB with a Zacks Rank #2 (Buy). A couple of stocks in the broader consumer staples sector that are worth considering include Inter Parfums Inc. IPAR and Helen of Troy Limited HELE carrying a Zacks Rank #1 (Strong Buy).
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