NWL Market Research & Analysis Report
Updated Nov 13, 2015

Growth and Balance Sheet

Newell Rubbermaid (NWL) net sales in the third quarter were $1.53 billion compared with $1.48 billion in the prior year. Core sales grew 5.9 percent. The net contribution from acquisitions and planned/completed divestitures was 340 basis points and foreign currency had a negative impact of 620 basis points. Reported gross margin was 39.1 percent, a 30 basis point improvement versus prior year. Net income was $168.1 million compared with $159.2 million in the prior year. Normalized diluted earnings per share were $0.62, an increase of 6.9 percent versus $0.58 in the prior year. The improvement in normalized diluted earnings per share was primarily attributable to the increase in core sales, the contribution from prior year acquisitions, gross margin expansion, lower overhead costs and the positive impact of fewer outstanding shares, which more than offset negative foreign currency impacts and increased interest expense related to borrowing in support of prior year acquisitions. Diluted earnings per share were $0.50, compared with $0.44 per diluted share in the prior year. Reported net income was $134.2 million, compared with $122.3 million in the prior year. In addition to the factors cited in the explanation of normalized diluted earnings per share, reported diluted earnings per share benefited from a lower tax rate, though were negatively impacted by higher incremental restructuring and other Project Renewal transformation costs. Operating cash flow was $339.9 million compared with $339.2 million in the prior year period. 

The company expects foreign currency to have a negative impact of about $0.41 to $0.44 per diluted share on 2015 normalized EPS driven by the stronger U.S. dollar to most currencies. Venezuela is expected to contribute about 1.3 percentage points of the 2015 full year core sales growth guidance range of 5.0 to 5.5 percent and about $0.12 to the company’s 2015 normalized EPS guidance range of $2.14 to $2.20.

Valuation

Newell Rubbermaid (NWL) P/E stands at 30.24 below the industry average of 30.78, and above the S&P 500 average of 17.45 The company is currently trading above the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 16.40x to 36.60 trailing 12-month earnings. NWL's current Price/Sales of 2.01 is above the average of its industry of 1.87. NWL’s head to head comparison to its main competitors shows that the company has gross margin in the peers average, and one that is at the industry average. The achieved operating margin of the company is above the average operating margin of the selected competitors, and it is above the industry average. The quarterly revenue is below the industry average and above its main competitors. The stock is currently trading below its intrinsic value of $48.41 this suggests that the stock is undervalued at these levels. The beta of 0.95 implies lower volatility of the stock with respect to the S&P 500. NWL has shown neutral earnings consistency over the last five years. Company’s earnings have increased by 6.61% over the same period. The current quarter earnings in comparison to the same quarter last year are -11.364%. NWL’s Total Debt/Equity of 153.21 is negative. NWL’s current price levels are above the maximum level, is trading 1.7% below the 52 week high of $44.99, and the technical analysis give a bullish view of the stock. The majority of analyst ratings are bullish. NWL dividend yield stands at 1.70% with payout ratio at 52.33%. 

About NWL

Newell Rubbermaid Inc. manufactures and markets consumer and commercial products worldwide. It operates through five segments: Writing, Home Solutions, Tools, Commercial Products, and Baby & Parenting. The Writing segment offers writing instruments, such as markers and highlighters, pens, and pencils; art products; fine writing instruments; and labeling solutions under the Sharpie, Paper Mate, Expo, Parker, Waterman, and Dymo Office brand names. The Home Solutions segment provides indoor/outdoor organization, food storage, and home storage products; durable beverage containers; gourmet cookware, bakeware, cutlery, and kitchen gadgets and utensils; window treatments; and hair care accessories under the Rubbermaid, Contigo, bubba, Calphalon, Levolor, and Goody brand names. The Tools segment offers hand and power tool accessories; industrial band saw blades; tools for HVAC systems; and label makers and printers for industrial use under the Irwin, Lenox, Hilmor, and Dymo Industrial brand names. The Commercial Products segment provides cleaning and refuse products, hygiene systems, and material handling solutions; computer carts; and wall-mounted workstations under the Rubbermaid Commercial Products and Rubbermaid Healthcare brand names. The Baby & Parenting segment offers infant and juvenile products, such as car seats, strollers, highchairs, and playards under the Graco, Baby Jogger, Aprica, and Teutonia brand names.

Competitor Comparison

Newell Rubbermaid Inc. N.V.

Highlights

The Company's products are marketed under a portfolio of various brands, including Sharpie, Paper Mate, Parker, Waterman, Dymo, Contigo, Rubbermaid, Levolor, Goody, Calphalon, Irwin, Lenox, Rubbermaid Commercial Products, Elmer's, Graco, Aprica and Baby Jogger. The Company operates through five segments: Writing, Home Solutions, Tools, Commercial Products and Baby & Parenting. The stock closed yesterday’s trading session at $44.22. In the past year, the stock has hit a 52-week low of $34.44 and 52-week high of $44.99. NWL has a market cap of $11.58 billion and is part of the consumer goods sector.

·   one of the largest global marketers of consumer and commercial products

·   strong brand portfolio

·   strong foothold in North America 

·   highly competitive consumer and commercial products markets

·   product issues

    high cost of key materials 

NWL Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. NWL's 52 week high is $44.99 current price is 44.20, is 1.7% below the 52 week high. 

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 30.24 below the average industry P/E ratio of 30.78 and is above the S&P 500 P/E ratio of 17.45. 

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 0.56% of NWL stock. Management's representation is not large enough. This does satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

NWL is trading in the range of $39.43 - $44.99 in the past 30 days. The stock has been showing support at $42.80 and resistance in the $45.00 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 48.84. Our indicators give a bullish view on NWL. 

The financial health of the company the higher the better, we evaluate all the financial ratios of the company. 

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 6 Buy, 9 Outperform, 2 Hold, 0 Underperform and 0 Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. NWL’s annual EPS for the last 5 years were 0.94, 0.63, 1.34, 1.43, 1.34 this type of earnings action is neutral. 

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 25% or should be less than the average Debt/Equity for its industry. NWL’s have total debt/equity ratio of 153.21 which is negative.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. NWL’s EPS growth for this quarter relative to the same quarter a year earlier is -11.36, below our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. NWL’s annual earnings growth rate over the past five years is 6.61%, below the target growth rate.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.