Newell Posts Better-Than Expected 4Q Results But Forward Guidance Disappoints

Shares in the parent company of Sharpie, Papermate and Rubbermaid, Newell Brands, dropped 7% on Friday after the company released better-than-expected fourth quarter results, but missed analysts’ forward-looking estimates.

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Newell (NWL) posted adjusted EPS of $0.56 compared to analysts’ estimates of $0.48, while revenues rose 2.5% year-on-year to $2.69 billion, beating forecasts of $2.61 billion.

Full year 2020 operating cash flow of $1.4 billion reflected strong progress on working capital initiatives, compared to $1 billion in 2019.

However, the company expects adjusted earnings of between $1.55 and $1.65 per share in 2021, falling short of analysts’ previous estimates of $1.70, with net sales in the first quarter in the $2.04 to $2.08 billion range.

Ravi Saligram, Newell’s President and CEO, said, “We are proud of our accomplishments in 2020, returning to meaningful core sales growth and operating margin improvement in the back half of the year… I am excited about Newell’s prospects and feel our best days are ahead.” (See Newell Brands stock analysis on TipRanks)

Jefferies analyst Kevin Grundy reiterated his Buy rating on Newell last week and raised his price target to $30 from $28. This implies upside potential of around 24% from current levels.

Commenting before the release of NWL’s results, Grundy told investors that he sees benefits from an improving macro/fundamental turnaround, leading to a better-than-expected Q1 2021 outlook.

Consensus among analysts is a Hold based on 2 Buys, 4 Holds and 1 Sell. The average analyst price target of $23.50 suggests that NWL is fully priced at current levels, with downside potential of around 3% over the next 12 months.