Newell's stock rockets toward a record gain, as turnaround efforts take shape

By Tomi Kilgore

Contigo, Graco, Crock-Pot parent's profit beat views, outlook was raised and gross margins continued to improve

Shares of Newell Brands Inc. were headed for a historic rally Friday, after the consumer-products company beat second-quarter profit expectations and raised the full-year outlook, as sales and gross margin continued to improve.

As part of an ongoing reorganization, the parent of a number of household-name brands including Crock-Pot, Contigo, Graco, Yankee Candle, Elmer's and Sharpie said it would "further optimize Newell's real-estate footprint" and pursue other cost-cutting actions.

The company expects the reorg to be mostly completed by the end of 2024, and to generate annualized savings of $65 million to $90 million.

"We are making significant progress in driving Newell's turnaround," said Chief Executive Chris Peterson.

Peterson said on the post-earnings call with analysts that he believes the strategy and operating model changes a year ago are "clearly working."

"Since introducing the new strategy, we've now reported four quarters of results, and over the past year we have improved the rate of year over year core sales growth from down 15% in the first half of 2023 to down 9% in the back half of 2023 to down 4.5% in the first half of 2024," Peterson said, according to a FactSet transcript.

The stock (NWL) blasted 36.6% higher in morning trading. That put it on track for the biggest one-day gain since the company went public in 1972. The current record was the 20.8% rally on March 17, 1975.

That's also the second straight quarter of big one-day, post-earnings gains, as the stock soared 12.3% on April 26 after first-quarter results.

The stock has now run up 51% since closing at a 15-year low of $5.73 on July 10.

Net income more than doubled, to $45 million, or 11 cents a share, from $18 million, or 4 cents a share, in the same period a year ago.

Excluding nonrecurring items, such as one-time restructuring costs and acquisition amortization, adjusted earnings per share rose to 36 cents from 24 cents, well above the FactSet consensus of 21 cents.

Net sales fell 7.8% to $2.03 billion, citing the negative impact of foreign-currency movements and business exits, to just miss the FactSet consensus of $2.05 billion.

The year-over-year sales decline has improved from 8.4% in the first quarter and from 9.1% in the fourth quarter.

Cost of sales fell more than sales, down 15.3% to $1.33 billion, to boost gross margin to 34.4% from 28.5%. Chief Financial Officer Mark Erceg noted that the gross margin improvement by 590 basis points (5.9 percentage points) builds on the 110, 360 and 380 basis point improvements seen during the past three quarters.

Looking ahead, Newell said it expects third-quarter adjusted EPS of 14 cents to 17 cents, which is below the current FactSet consensus of 20 cents.

But the company also raised its full-year guidance range for adjusted EPS to 60 cents to 65 cents, after lifting it to 52 cents to 62 cents from 18 cents to 21 cents three months ago. The outlook for net sales growth was narrowed to a decline of 7% to 6% from a decline of 8% to 5%.

The stock has now eased just 0.2% year to date, while the S&P 500 index SPX has gained 14.1%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-26-24 1056ET

Copyright (c) 2024 Dow Jones & Company, Inc.