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Why Newell Brands' Stock Fell 12% in September

By Demitri Kalogeropoulos - Oct 3, 2017 at 3:08PM

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A profit downgrade spooked investors last month.

What happened

Consumer goods specialist Newell Brands (NWL 1.59%) shed 12% last month, according to data provided by S&P Global Market Intelligence.

The decline sent Newell's stock into negative territory in 2017, and its 4% dip puts it well behind the double-digit gain the broader market has enjoyed.

NWL Chart

NWL data by YCharts.

So what

September's slump followed a business update early in the month that saw the company lower its profit forecast for the year. CEO Michael Polk and his executive team now see earnings ranging from $2.95 per share to $3.05 per share, compared to the prior range of $3 to $3.20 per share.

Rubber food containers sitting in a refrigerator.

Image source: Getty Images.

Hurricane Harvey had a devastating impact on a few key raw material suppliers located in Texas and Louisiana. As a result, Newell has had to look elsewhere for these supplies, management said, and while it has had some success securing them, their costs are significantly higher than expected.

Now what

Executives believe raw material costs will remain elevated through this year and into 2018, and that means lower profits than would otherwise be the case. However, the company still expects to grow sales at the same healthy pace. Thus, this profit downgrade appears to be just a temporary speed bump that doesn't threaten Newell's recent market share gains or its long-run trend of rising profitability.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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