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Why Newell Brands Inc. Stock Shot Higher Today

By Jeremy Bowman - May 8, 2017 at 12:35PM

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The owner of popular brands like Elmer's glue and Graco strollers turned in a stronger-than-expected first-quarter earnings report.

What happened

Shares of Newell Brands Inc. ( NWL 1.39% ) were surging Monday after the maker of consumer products ranging from Sharpie markers to Graco strollers to Elmer's glue posted better-than-expected first-quarter earnings.

As of 12:20 a.m. EDT, the stock was up 11.7%.

A group of students making art

Image source: Newell Brands.

So what

The diversified consumer-products company said that revenue jumped 148% to $3.27 billion, beating expectations of $3.21 billion. Most of its jump in sales was due to last year's acquisition of the Jarden Corp., which brought brands like Rawlings baseball gear and Mr. Coffee under the Newell umbrella. Stripping out the effects of the acquisition, core sales increased 2.5%. 

Adjusted earnings per share, however, fell from $0.40 a year to $0.34 due to higher interest expenses and increased share count due to the Jarden purchase. But that still beat the consensus estimate for EPS of $0.29. Net income increased 52% to $164 million, indicating that underlying profitability remains strong.

"Our first quarter results provide strong evidence of our team's capacity to perform while we transform," said CEO Michael Polk, who pointed to competitive core sales growth, deleveraging of debt, and the successful integration of Jarden.

Now what

The company raised its earnings guidance for the year; it now expects EPS to land in the $3.00 to $3.20 range, up from a prior forecast range of $2.95 to $3.15.  It also reaffirmed revenue growth expectations of 9.5% to 11%, and a core sales growth forecast of 2.5% to 4%, and hiked its dividend 21% to $0.23 per share.

By comparison, the full-year analyst consensus was for EPS of $3.05 and 10.9% in revenue growth.

Though the overall retail industry has struggled, consumers have shown some loyalty to brands such as Newell's, and its strong brand portfolio should help it continue to thrive even as shopping habits shift. I'd expect the stock's steady growth to continue.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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$21.17 (1.39%) $0.29

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