Newell Rubbermaid Tops - Analyst Blog

Newell Rubbermaid Inc. (NWL), the maker of Sharpie pens and Rubbermaid containers, logged a strong 23.4% growth in second quarter 2010 GAAP earnings to $130.4 million from $105.7 million in the year-ago quarter. Excluding special items, adjusted earnings per share came in at 51 cents, which easily surpassed the Zacks Consensus Estimate of 44 cents as well as the year-ago adjusted EPS of 47 cents. The strong quarterly performance was mainly attributable to increased core sales, improved productivity and better working capital management.

During the quarter, Newell recorded a modest 0.5% year-over-year decline in net sales to $1,496.2 million, marginally behind the Zacks Consensus Estimate of $1,523.0 million. The decline was primarily caused by strategic product line exits undertaken by Newell in 2009, which reduced sales by 1.9%. However, the reduction in net sales was partially offset by a 1.5% growth in Core sales that primarily benefitted from improved market share, distribution wins and strong demand from Latin American and EMEA (Europe, the Middle East and Africa) markets.

Newell’s quarterly gross profit rose 5.2% year-over-year to $587.3 million, while gross margin expanded 210 bps to 39.3% mainly driven by productivity gains and favorable product mix. Operating income increased 2.0% year-over-year to $203.5 million, while operating margin grew 30 bps to 13.6% as higher sales, improved gross margin and lower restructuring expenses was partially offset by higher selling, general and administrative expenses.

Newell ended the quarter with cash and cash equivalents of $259.8 million and long-term debt-to-capitalization ratio of 56.3%, compared to a cash balance of $418.1 million and long-term debt-to-capitalization of 62.9% in the year-ago quarter. In the first half of 2010, the company generated an operating cash flow of $183.4 million in the quarter, primarily driven by higher earnings and improved working capital management. During the first half, Newell utilized $108.4 million of cash towards debt repayment, $69.3 million towards capital expenditure and $28.0 million towards dividend payments.

Buoyed by the strong quarterly performance, Newell lifted its 2010 adjusted earnings to a range between $1.40 and $1.50 per share, compared to earlier prediction of $1.38 to $1.48 per share. The revised guidance is in line with the Zacks Consensus Estimate of $1.47 per share, which remained constant over the past 2 months. For 2011, the Zacks Consensus Estimate has edged up a penny in just the past week to $1.66 per share as 1 of 15 covering analysts raised projection.

Newell Rubbermaid currently has a short-term Zacks #3 Rank (Hold) rating and a long-term Underperform recommendation.
 
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