On Monday, Canaccord Genuity maintained a Buy rating on Newell Rubbermaid (NASDAQ:NWL) stock and increased the price target to $13.00 from the previous $12.00. The adjustment follows the company's third-quarter results, which were announced before the market opened on Friday.
Newell Brands reported Q3 sales that were generally in line with the consensus. The Learning & Development segment showed a notable performance with a 4.4% increase compared to the expected 1.7%, and the Home & Commercial Solutions segment declined by 2.3%, which was still better than the anticipated 4.1% decrease.
However, the Outdoor & Recreation division underperformed, missing the consensus core sales with a 16.8% drop versus the expected 12.9%, marking its ninth consecutive quarter of double-digit percentage declines.
The company's adjusted gross margin exceeded expectations by more than 200 basis points, leading to an adjusted EBITDA that was 13% higher than what analysts had projected. A change in Newell Brands' normalization practice affected the adjusted EPS by $0.02.
According to the firm's analysis, Newell Brands' new strategy, which has been in place for five quarters and focuses investment on its largest and most profitable brands, is showing positive results with a significant sequential improvement in gross margin and sales.
Management at Newell Brands anticipates a return to top-line growth sometime next year, supporting Canaccord Genuity's confidence that modest low single-digit percentage top-line growth is achievable once it resumes in 2025 and beyond. The raised price target reflects increased estimates based on the company's performance and strategic direction.
In other recent news, Newell Brands reported its third-quarter 2024 financial results, showcasing a blend of challenges and strategic triumphs. The company saw a sequential improvement in core sales and a significant rise in normalized gross margin to 35.4%.
Despite a 1.7% decline in core sales and a 4.9% decrease in net sales, Newell Brands managed to achieve a normalized operating margin of 9.5% and cut net debt by over $560 million.
In light of these developments, the company's management has raised its full-year outlook for operating margin, earnings per share, and cash flow. The full-year normalized EPS guidance has been increased to $0.63 to $0.66, with an operating cash flow forecast raised to $500 million to $600 million. However, core sales are expected to decline by 2% to 5% in Q4 2024, and net sales are projected to decrease by 4% to 7% in the same quarter.
Newell Brands has been focusing on product mix over pricing strategies to enhance gross margins, exiting structurally unsound businesses, and diversifying its supply chain to reduce reliance on China. The company's strategic focus on mid and high-price point offerings, new product innovations, and increased advertising and promotion spending are contributing to positive trends.
InvestingPro Insights
Recent data from InvestingPro reveals that Newell Brands (NASDAQ:NWL) has demonstrated strong performance over the past year, with a 1-year price total return of 30.78% as of the latest available data. This aligns with Canaccord Genuity's positive outlook and increased price target for the company. The stock's year-to-date price total return of 16.05% further supports the notion that investors are responding favorably to Newell Brands' new strategy and improved financial performance.
InvestingPro Tips highlight additional aspects of Newell Brands' financial situation. One tip notes that the company has a high shareholder yield, which could be attractive to investors looking for value. Another tip suggests that Newell Brands is trading at a low Price/Book multiple, potentially indicating an undervalued stock.
These insights complement the article's discussion of Newell Brands' strategic focus on its most profitable brands and the sequential improvement in gross margins. For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Newell Brands, providing a deeper understanding of the company's financial health and market position.
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