Newell Brands (NWL) has benefited from stable consumption trends and increased top-line sales in some of its product categories. In addition, the company has a history of consistent dividend payouts. However, given its declining earnings and weak profitability, is it worth betting on the stock now? Let’s discuss.
Newell Brands (NWL) in Atlanta, Ga., Is a multinational consumer products corporation with an impressive portfolio of well-known brands, including Rubbermaid, FoodSaver, Calphalon, Sistema, Sharpie, Paper Mate, Dymo, EXPO, Elmer’s, Yankee Candle, Graco, NUK, Rubbermaid Commercial Products, Spontex, Coleman, Campingaz, Contigo, Oster, Sunbeam, and Mr. Coffee.
NWL’s dividend payouts have grown at a 3.9% CAGR over the past five years. While its four-year average dividend yield is 4.7%, its current dividend translates to a 3.5% yield. And it announced a $ 0.23 per share dividend on Feb.3, 2022, payable on March 15.
The stock has gained 8.7% in price over the past month on the back of sales growth across its segments, including Food, Commercial Appliances & Cookware, and Outdoor & Recreation. However, given the company’s declining earnings and weak profit margins, the stock’s near-term prospects look uncertain.
Here is what could shape NWL’s performance in the near term:
NWL’s net sales increased 4.3% year-over-year to $ 2.81 billion for the fourth quarter, ended Dec. 31, 2021. However, its operating income declined 32.3% from its year-ago value to $ 168 million. The company’s net profit decreased 24.4% from its prior-year quarter to $ 96. And its EPS narrowed 26.7% year-over-year to $ 0.22.
NWL’s 13% EBITDA margin is 4.6% higher than the 12.5% industry average Also, its $ 884 million trailing-12-months cash from operations is 394.3% higher than the $ 178.83 million industry average.
However, NWL’s 31.3% trailing-12-months gross profit margin is 11.8% lower than the 35.5% industry average. Also, its trailing-12-months asset turnover ratio, ROA, and ROC are 29.7%, 32.4%, and 12.4% lower than their respective industry averages. And its 5.4% trailing-12-months net income margin is 17.6% lower than the 6.6% industry average.
POWR Ratings Reflect Uncertainty
NWL has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NWL has a C grade for Growth and Quality. The company’s mixed profitability and financials are consistent with these grades.
Among 61 stocks in the B-rated Home Improvement & Goods industry, NWL is ranked # 31.
Beyond what I have stated above, one can view NWL ratings for Stability, Value, Momentum, and Sentiment here.
Though NWL experienced core sales growth in the last reported quarter, its inadequate operational performance and declining earnings could raise investors’ concerns. In addition, rising inflation and other macroeconomic headwinds might hinder its growth prospects. So, we think it is better to wait before scooping up its shares.
How Does Newell Brands Inc. (NWL) Stack Up Against its Peers?
While NWL has an overall C rating, one might want to consider its industry peers, Acuity Brands Inc. (AYI), Masonite International Corp. (DOOR), and Duluth Holdings Inc. (DLTH), which have an overall A (Strong Buy) rating.
NWL shares were trading at $ 26.08 per share on Friday morning, up $ 0.16 (+ 0.62%). Year-to-date, NWL has gained 19.41%, versus a -7.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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