Why Shares of Newell Brands Plummeted Today

Shares of the Rubbermaid parent tumbled on another subpar earnings report.

Jeremy Bowman
Jeremy Bowman
Feb 15, 2019 at 12:35PM
Consumer Goods

What happened

Shares of Newell Brands (NASDAQ:NWL) were taking a dive today after the household-products maker posted another disappointing round of results in its fourth-quarter earnings report; sales slipped, and the company offered weak guidance in 2019. Consequently, the stock was down 19% as of 11:28 a.m. EST.

So what  

Newell, which owns a number of well-known brands including Rubbermaid containers, Elmer's glue, and Sharpie markers, said overall revenue from continuing operations fell 6% to $2.34 billion, worse than analyst expectations at $2.43 billion. Foreign currency headwinds, the new revenue recognition standard, and a 1.2% decline in core sales weighed on performance.

A multicolored set of Rubbermaid containers.

Image source: Newell Brands.

Management did note that core sales improved in all categories sequentially, and adjusted operating margin increased 70 basis points to 11.4% with the help of higher prices and production efficiencies, and the company also took a $157 million asset impairment charge.

Adjusted earnings per share increased from $0.68 to $0.71, which topped estimates at $0.67. However, investors seemed to focus on the ongoing impairment charges, which underscored structural challenges within the company.

Highlighting the company's progress in its turnaround plan, CEO Michael Polk said, "We were encouraged by the sequential improvement in core sales growth across all segments, the return to growth of our Learning & Development segment driven by building momentum on Writing, and solid margin expansion as a result of continued diligent cost management and pricing." 

Check out the latest Newell earnings call transcript.

Now what 

Newell also issued a disappointing outlook for the current year, saying it sees a low-single-digit core sales decline and overall revenue of $8.2 billion to $8.4 billion, much less than the consensus estimate at $8.78 billion. Newell's guidance takes into account the sale of its Pure Fishing and Jostens brands, announced in November 2018, for about $2.5 billion. 

It also forecast adjusted EPS of $1.50 to $1.65, which is down significantly from $2.68 last year and much worse than the analyst view at $2.14. Polk said it would be another transitional year, adding: "We've planned 2019 to be another year of significant portfolio and organization transformation. We intend to drive the Accelerated Transformation Plan to completion in 2019, and despite the ongoing negative impact of retailer bankruptcies, foreign exchange, inflation and tariffs, we expect to stabilize and then reignite core sales growth, increase margins, and strengthen the operational and financial performance of the company."

Given the sharply lower earnings forecast and the company's structural problems, it's not surprising to see the stock tumbling today.