Summary
- Newell Brands remains a dicey investment but things are looking up for shareholders.
- New management is extremely focused and analysts are positive about the plans and implementation.
- A well-designed e-commerce and afflated social media campaign will ensure a healthy expansion of revenues and globalization.
Newell Brands (NWL) remains a dicey investment, as I indicated in my Seeking Alpha article earlier in the year but things are looking up for shareholders. The share price has clawed back $4 almost touching $19. The dividend yield remains a healthy 4.86%. At a time of high company valuations and surging share prices on the markets, NWL is a stock I recommend for retail investors willing to hold and stash away for a while.
Sharp Focus and Implementation
Management is rifle-shot focused on implementing its turnaround strategy:
- Focusing on its name brands,*
- Cutting SG&A and other costs resulting in $424M in operating cash flow compared with $182M in the prior year,
- Engaging all moves methodically and with due diligence ensuring decisions fit with corporate missions, infrastructure, and company culture unlike the admittedly deleterious Rubbermaid and subsequent acquisitions,
- Unloading non-core businesses (~24 to-date) largely responsible for a reported decline in Q3 revenues of 3.8 percent. But total revenues for 2019 are expected to grow by about 6.6 percent while total growth in expenses is estimated to be 3.5 percent,
- Paying-down debt from high leverage of 14 (~$12B), and
- Buying back shares.
In July 2019 through November, five of nine analysts on Seeking Alpha wrote bullish or very bullish articles about NWL. One was bearish and two neutral. I am bullish on Newell, too, in part because the economy is still humming, and Americans are spenders more than savers. "American households are forecast to save 6.88% of their disposable income in 2020." Americans are expected to be in 2020 low on the scale of savings disposable income coming in 12th among 27 OECD countries and behind Slovenia, Ireland and Sweden. Americans have yet to learn the Suzie Orman lesson that “You need to get as much pleasure out of saving as you do spending.”
*Newell Brands [NASDAQ: NWL] is a leading global consumer goods company with a strong portfolio of well-known brands, including Paper Mate®, Sharpie®, Dymo®, EXPO®, Parker®, Elmer’s®, Coleman®, Marmot®, Oster®, Sunbeam®, FoodSaver®, Mr. Coffee®, Rubbermaid Commercial Products®, Graco®, Baby Jogger®, NUK®, Calphalon®, Rubbermaid®, Contigo®, First Alert®, and Yankee Candle®. For hundreds of millions of consumers, Newell Brands makes life better every day, where they live, learn, work and play. Source: Newell Brands
Want What We Want When We Want It
Consumer spending accounts for nearly three-quarters of America’s economic growth. First, a portent for NWL is the hallmark of millennials and Gen Zers. They buy what they want when they want it especially consumer products. Second, trade sputters and stalls seem to be nearing an end with Canada, Mexico, and China. Rumors swirl about a major trade deal after Brexit with the UK. These are opportunities for Newell’s name brands to expand sales. Earnings will improve. The target price is consistently on the upswing in recent months with one analyst expecting NWL to hit $25 per share in 2020.
A recession or at least a setback to consumer spending is always possible. But a new report from the US Bureau of Economic Analysis giving a healthy omen for NWL tells us that:
- Current-dollar personal income is up in Q3 ’19
- Disposable personal income rose 4.5 percent
- Consumer spending is undergirding the US GDP rising 2.9 percent in Q3 including a spending increase of 5.5 percent on consumer goods products
