Newell Brands (NYSE: NWL) experienced a decline in its stock on Friday following its announcement of disappointing financial guidance for the upcoming year. However, there are indications that the company’s new strategy is starting to yield positive results.
Earnings Projection Falls Short of Expectations
In its financial report, Newell Brands indicated that it anticipates full-year earnings ranging from 52 cents to 62 cents per share in 2024. This projection is lower than the Wall Street estimate of 77 cents per share and represents a considerable drop from the 79 cents per share reported in 2023.
Decline in Revenue Expected
Newell also expects a slide in revenue for 2024, with a projected decrease between 8% and 5%. This would amount to a revenue range of $7.5 billion to $7.7 billion. Analysts surveyed by FactSet had anticipated higher sales figures of $7.7 billion for 2024.
Fourth Quarter Performance Exceeds Expectations
Despite the disappointing guidance for the future, Newell posted better-than-expected results for the fourth quarter. The company reported earnings of 22 cents per share on revenue of $2.08 billion. Analysts surveyed by FactSet had projected earnings of 17 cents per share on sales of $1.98 billion.
Market Reaction and Comparison with Competitors
The news took a toll on Newell’s stock, causing it to plummet by 13% to $7.31 in recent trading on Friday. This marks the largest percentage decrease since March 2020 and the lowest closing price since November 2023, according to Dow Jones Market Data.
Meanwhile, competitor Tupperware Brands saw a slight increase of 0.6% in its stock on Friday, while Procter & Gamble experienced a decline of 0.7%.
In conclusion, although Newell Brands faces challenges with its financial projections, there are positive signs that its new strategy is beginning to yield results. The company will need to navigate carefully in the coming year to overcome the projected decline in revenue and restore investor confidence.
Newell’s Road to Recovery
Despite a challenging 2023, Newell, the company behind popular brands like Rubbermaid, Sharpie, and Yankee Candle, is striving to revitalize its strategic direction. Last May, a new CEO was appointed, followed by an unveiling of an updated company strategy in June. The focus of this strategy is to reduce costs while emphasizing their largest and most profitable brands.
While the recent fourth-quarter report may seem disappointing at first glance, there are notable improvements that indicate Newell’s path towards recovery. The company reported a growth in gross margin, with the fourth-quarter margin reaching 29.9% compared to 26.3% in the same period the previous year. Additionally, the operating cash flow for the full year increased to $930 million, with a significant improvement compared to the prior year’s outflow of $272 million.
Chief Executive Chris Peterson acknowledged the challenging external environment but emphasized Newell’s achievements in the face of adversity. He highlighted “record productivity across the supply chain” and a remarkable improvement in cash flow through inventory management.
RBC Capital Markets analyst Nik Modi expressed optimism in Newell’s new management team and their dedication to productivity and cost-saving measures. This commitment is expected to position the company favorably in the long term. Modi maintained his Sector Perform rating and a price target of $9 for the stock.
Despite setbacks and industry challenges, Newell’s proactive measures demonstrate their determination to overcome obstacles and ultimately achieve success.
