Newell Beats on Higher Production - Analyst Blog

Newell Rubbermaid Inc. (NWL), the maker of Sharpie pens and Rubbermaid containers, logged a strong 26.0% growth in fourth quarter 2010 earnings to net 34 cents a share from 27 cents a share in the year-ago quarter. Earnings also outpaced the Zacks Consensus Estimate of 32 cents a share. Including special items, earnings per share came in at 25 cents a share.  The strong quarterly performance was mainly attributable to increased core sales and improved productivity.

For fiscal 2010, Newell recorded earnings per share of $1.52 compared with $1.31 per share in the prior year. Results also beat the Zacks Consensus Estimate of $1.50 per share.

During the quarter, Newell recorded a modest jump of 3.4% year over year in net sales to gross $1,469.3 million, beating the Zacks Consensus Estimate of $1,451.0 million. Core sales of the company improved 4.9% for the quarter. For fiscal 2010, net sales upped 3.3% to $5,759.2 million from $5,577.6 million in fiscal 2009. It also outdid the Zacks Consensus Estimate of $5,743.0. Core sales of the company increased 4.7% for the year.

Newell's quarterly gross profit rose 3.6% year over year to $544.7 million, while gross margin expanded 10 bps to 37.1% mainly driven by productivity gains and favorable product mix that fully offset the negative impact of input cost inflation. Operating income increased 7.2% year over year to $152.6 million, while operating margin improved 40 basis points to 10.4%.

For the fiscal 2010, gross profit jumped 5.9% to $2,170.8 million while gross margin expanded 100 basis points to 37.7%. Operating income increased 7.1% to $722.6 million. Operating margin, at 12.5%, showed an improvement of 40 basis points.       

Newell ended the year with cash and cash equivalents of $139.6 million and long-term debt of $2,063.9 million. In fiscal 2010, the company generated an operating cash flow of $582.6 million, primarily driven by higher earnings and improved working capital management. Capital expenditure came in at $164.7 million for the year.

Newell expects core sales to augment in the 4%–5% range in fiscal 2011. Better productivity, mix and pricing are expected to fully offset the impact of higher input cost inflation. Accordingly, gross margin expansion of 50–75 basis points is on the cards for fiscal 2011.

The company expects its 2011 adjusted earnings to range between $1.67 and $1.70 per share. The Zacks Consensus Estimate, of $1.68 per share, constant over the past 2 months, is on the lower end of the guided range.

Newell Rubbermaid is one of the leading manufacturers of home and office products in the U.S. The company also possesses a strong portfolio of widely popular brands, such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. Leveraging its strong brand equity, Newell Rubbermaid can expect robust earnings, should the market scenario change for the better.

The company faces intense competition from numerous manufacturers and distributors of consumer and commercial products, such as Jarden Corp.(JAH), Fortune Brands Inc.(FO), Cooper Industries plc(CBE), and Avery Dennison Corporation(AVY).

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

 
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