Newell Rubbermaid 4Q Beats - Analyst Blog

By Zacks | February 01, 2013 AAA

Newell Rubbermaid Inc. (NWL) - the producer of Sharpie pens and Rubbermaid containers - reported fourth-quarter 2012 adjusted earnings per share of 43 cents, marginally beating the Zacks Consensus Estimate of 42 cents and year-ago quarter earnings of 40 cents. The earnings growth was a result of the positive impact from pricing and productivity and lower structural selling as well as general and administrative expenses as a percentage of sales. On a reported basis, including special items, the company reported earnings of 35 cents per share compared to 27 cents in the comparable year-ago quarter.

Top-Line and Margin Details

During the quarter, Newell's net sales inched up 1.6% to $1,518.8 million, beating the Zacks Consensus Estimate of $1,514.0 million. Core sales of the company increased 2.2%, excluding the negative impact from foreign currency translation. Robust performance at the company's Tools, Baby & Parenting and Writing segments and improved sales in Latin America are primarily attributable to this growth.

Newell's quarterly gross profit marginally inched down 0.3% year over year to $555.0 million, while gross margin contracted 70 basis points to 36.5% primarily due to increased investments related to fourth quarter events.

Operating income increased 22.5% year over year to $153.8 million, while operating margin expanded 170 basis points to 10.1%. However, the company's normalized operating margin contracted 10 basis points due to higher expenses related incentive compensation, customer programs and strategic selling, general and administrative costs associated with sales force enhancement.

Other Financial Details

Newell ended the fiscal with cash and cash equivalents of $183.8 million and long-term debt of $1706.5 million. Shareholders' equity was $1,996.7 million, excluding non-controlling interests of $3.5 million.

During the fiscal, the company's capital expenditure came in at $177.2 million and generated a cash flow of $618.5 million from operating activities.

Fiscal 2013 Guidance

Concurrently, the company provided its outlook for fiscal 2013. Management anticipates core sales growth of 2%-4% and adjusted earnings in the range of $1.78-$1.84 per share for fiscal 2013. Moreover, Newell expects an improvement of 20 basis points in operating margin during fiscal 2013.

Moreover, this Zacks Rank #4 (Sell) company expects to achieve its targeted annualized cost savings of $270-$325 million by the second quarter of fiscal 2015 through its Project Renewal program. Moreover, Newell will be saving costs between $90 million and $100 million through its Project Renewal program in the first half of 2013.

The initiative will be funded by savings through reduced structural selling, general and administrative expenses. The Project Renewal initiative will facilitate the company in reducing the complexity of the organization while increasing investments in the most important growth areas within the business.

Further, Newell expects to generate operating cash flow in the range of $575-$625 million in fiscal 2013 with planned capital expenditures between $175 million and $200 million.

Other Stocks to Consider

Other stocks in the same industry that are worth considering include Jarden Corporation (JAH), Tupperware Brands Corporation (TUP) and Avery Dennison Corporation (AVY). All these companies carry a Zacks Rank #2 (Buy).

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