Newell Stock Declines 22% in 3 Months: Can it Rebound?

Newell Brands Inc. NWL stock has been under pressure lately, with shares dropping as much as 21.5% in the past three months, while the broader Zacks Consumer Products – Staples industry has dipped 1.9%. The stock's current trading level is 36% below its 52-week high of $10.72.

The company has been witnessing a challenging macroeconomic environment and elevated levels of core inflation that have led to muted demand for discretionary and durable products. This resulted in a 7.8% year-over-year decline in second-quarter 2024 revenues, following a revenue decline of 4.2% year over year in the preceding quarter. The decline was driven by reduced core sales, adverse currency impacts and business exits.

Looking ahead, Newell Brands management provided a dismal outlook for the upcoming quarters. For the third quarter, the company expects a 4-6% decline in net sales, with core sales anticipated to be between flat and a 2% decline. For 2024, it forecasts a year-over-year sales decrease of 6-7%, alongside a core sales decline of 3-4%.

These estimates reflect anticipated pressure on various product categories, with expected declines in low single digits. Additionally, the company has been facing a higher-than-previously anticipated headwind from foreign exchange, backed by current spot rates. This challenging outlook underscores the difficulties Newell Brands is encountering in the current economic environment.

Due to the persistent challenges of inflation and the volatile nature of market conditions, management is not very optimistic about its earnings picture. The Zacks Consensus Estimate for 2024 earnings per share is pegged at 65 cents, indicating a decline of 19% year over year.

Image Source: Zacks Investment Research

What Could Turn the Tables for Newell?

Newell Brands is focused on enhancing productivity and efficiency through various initiatives, including productivity plans, automation, and the full rollout of Project Ovid. The company has been looking to optimize its category mix within each business unit. Additionally, Project Phoenix, aimed at reducing overhead costs and streamlining operations, is expected to contribute positively to the company's results.

Despite the recent slowdown, Newell Brand has shown resilience in its core business. The company's third-quarter fiscal 2024 results demonstrated 490 basis points (bps) gross margin expansion, driven by gains from the productivity program and pricing actions. This marked the fourth straight quarter of gross margin expansion for NWL. Normalized operating margin increased 170 bps, backed by productivity, pricing, favorable mix, and organizational restructuring-related savings.

Further, the company is enhancing its front-end commercial capabilities through consumer-driven innovations. Upcoming products include the Graco SmartSense Soothing Bassinet and Swing, and the Rubbermaid Brilliance line. This Zacks Rank #3 (Hold) company is also on track to launch the battery-powered Rubbermaid Commercial carts and the FoodSaver Handheld Plus, a cordless vacuum sealer for food preservation.

Newell Brands is advancing its e-commerce efforts by investing in digital channels and enhancing customer engagement. The company has implemented buy-online, pick-up in-store, and ship-from-store services at its Yankee Candle stores. These traits position the company for long-term growth.

3 Picks You Can't Miss

Here, we have highlighted three better-ranked food stocks, namely, Vital Farms VITL, Freshpet, Inc. FRPT and The Chef's Warehouse CHEF.

The Chef's Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average.

The Zacks Consensus Estimate for The Chef's Warehouse's current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.

Vital Farms offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter average earnings surprise of 82.5%.

The Zacks Consensus Estimate for Vital Farms' current financial-year earnings suggests growth of 72.9% from the year-ago reported numbers.

Freshpet, Inc., a pet food company, has a trailing four-quarter earnings surprise of 132.9%, on average. FRPT currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Freshpet's current financial-year sales and earnings indicates growth of 26.1% and 251.4%, respectively, from the prior-year reported level.

To read this article on Zacks.com click here.