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Newell (NWL) Q1 Loss Wider Than Estimates, Sales Surpass

Newell Brands Inc. NWL has reported first-quarter 2023 results, wherein the adjusted loss was wider than the Zacks Consensus Estimate while sales beat the same. Both metrics declined year over year. Despite the challenging macroeconomic environment, the results have gained from Project Phoenix, as well as distribution and transportation benefits related to Project Ovid.

Although management retained its 2023 outlook, the company expects the guidance to be at the low end of the range due to muted consumer discretionary spending in its categories.

In the past three months, shares of NWL have plunged 24.4% compared with the industry’s 5.6% decline.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Q1 Details

The company’s recorded a loss of 6 cents per share in the first quarter against prior year quarter’s earnings of 35 cents. The metric was wider than the Zacks Consensus Estimate and our estimate of a loss of 4 cents each.

Net sales declined 24.4% year over year to $1,805 million but beat the Zacks Consensus Estimate of $1,786 million and our estimate of $1,804 million. This includes the adverse impacts of the sale of the Connected Home & Security (CH&S) business. Also, core sales fell 18% year over year. This, along with unfavorable foreign exchange and category exits, hurt sales.

The normalized gross margin contracted 410 bps year over year to 27.1%. The normalized operating margin contracted 820 bps year over year to 2.4% in the reported quarter.

Segmental Details

Net sales in the Home & Commercial Solutions segment were $971 million in the first quarter, down 28% from the prior-year period’s number. The metric missed the consensus mark of $1,036.2 million. Core sales declined 18.8% year over year. On the flip side, the adverse impacts of the sale of the CH&S business, unfavorable foreign currency and certain category exits acted as deterrents.

The Learning and Development segment recorded net sales of $564 million, which declined 13.2% from the prior-year quarter. The metric beat the consensus mark of $489 million. The downtrend is led by a 10.8% decrease in core sales, with the Writing business remaining flat year over year and a decline in the Baby business. Adverse currency rates also affected the segment’s sales in the quarter.

The Outdoor and Recreation segment’s net sales of $270 million declined 30.4% from the prior-year quarter. Also, the metric lagged the consensus mark of $279 million. However, a core sales decline of 27.4% and foreign-exchange headwinds acted as deterrents.

Other Financial Details

Newell Brands ended the quarter with cash and cash equivalents of $271 million, long-term debt of $4,776 million, net debt outstanding of $5.4 billion and shareholders’ equity of $3,333 million. NWL also used $77 million for operating activities in the said period.

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Newell Brands Inc. Price, Consensus and EPS Surprise

 

Newell Brands Inc. price-consensus-eps-surprise-chart | Newell Brands Inc. Quote

Outlook

Management retained its guidance for 2023 and issued second-quarter fiscal 2023. This Zacks Rank #3 (Hold) company anticipates net sales of $8.4-$8.6 billion. Core sales are expected to decline 8-6%. The normalized operating margin is expected to be 9.6-10.1%. Normalized earnings per share are forecast to be 95 cents to $1.08. For 2023, the company envisions generating an operating cash flow of $700-$900 million.

For second-quarter 2023, net sales are envisioned to be $2.13-$2.24 billion, with a core sales decline of 14-10%. For the quarter, the company expects a normalized operating margin of 6.5-8% and a bottom line of 10-18 cents per share.

Consumer Staple Stocks Worth a Look

Some better-ranked stocks are Inter Parfums IPAR, General Mills GIS and KimberlyClark KMB.

IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and earnings suggests growth of 10.5% and 0.8%, respectively, from the year-ago reported numbers.

General Mills is a major designer, marketer and distributor of premium lifestyle products. The company currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.

The Zacks Consensus Estimate for General Mills’ current financial year’s sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.

KimberlyClark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 1.4%, on average.

The Zacks Consensus Estimate for KimberlyClark’s current financial year’s sales and earnings suggests growth of 2% and 5.2%, respectively, from the year-ago reported numbers.

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