- Raymond James analyst Olivia Tong reiterated a Strong Buy rating on the shares of Newell Brands Inc NWL and lowered the price target from $18 to $17.
- The company reported 4Q results that reflected more challenging macros and retailer inventory destocking, with core sales -9.4% y/y and EPS $0.16.
- The analyst said that the challenges continue into 2023, materially impacting 1H and leading to NWL’s cautious approach to the FY outlook.
- FY core sales are expected to be -8% to -6% and EPS $0.95-1.08, with the decline attributed to category weakness, retail destocking, high input costs that have yet to lap, as well as higher interest expense, tax and other non-operating expenses, added the analyst.
- Notwithstanding its current challenges, the analyst expects NWL to begin stabilizing as the year progresses, helped by alleviating cost pressures, restructuring benefits, and easing comps.
- Also Read: Newell Brands Unveils 'Project Phoenix' Savings Initiative; Cuts 13% Of Office Positions & Consolidates Segments
- The inventory and category dynamics are certainly not unique to NWL. While 2023 is panning out to be a reset year for the company, the changes NWL is making to restore profitable growth position it considerably better to compete when conditions improve, the analyst said.
- SKU reduction continues, finishing at 28k at 2022-end, down from 36k in 2021 and 100k+ in 2018, and the benefits of Project Ovid have yet to be materially realized while the recently announced Project Phoenix is just beginning, added the analyst.
- Post-reset, the analyst thinks NWL can return to core sales growth in-line with its reiterated evergreen target of +low single-digits.
- Current President Chris Peterson, who will be promoted to CEO in May, also noted a broader review of NWL’s portfolio and strategic direction, an important move as it consolidates divisions.
- With action items to improve profit, a more balanced portfolio vs. non-durable peers, and manageable leverage, NWL trades at a discounted multiple of 14x P/E on 2023E vs. a pre-Jardin historical range of 15-19x, the analyst specified.
- Price Action: NWL shares are trading lower by 0.91% at $14.64 on the last check Monday.
- Photo Via Company
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