It’s Time To Start Buying High-Yield Newell Brands

Newell Brands Is Turning A Corner 

Newell Brands NASDAQ: NWL caught the market’s attention when it released Q3 results. While results were mostly in-line with the market’s expectations details within the report including the guidance point to growing momentum. The company has been working hard over the past few years to effect a turnaround that has the company on track for revenue growth, earnings growth, and dividend growth for patient investors. Until then, there is the 4.0% dividend yield, deep value, and rapidly improving balance sheet for investors to savor.

Newell Brands Beats And Guides Higher 

Newell Brands certainly felt the impact of supply chain disruptions and inflation but not to the extent of others with such broad exposure to the global supply chain. The company reported $2.79 billion in net revenue which is up 3.3% from last year and last year the company posted positive comps. On a two-year basis, the company’s revenue is a little more than 13% and beat the Marketbeat.com consensus estimate by 35 basis points. At the core level, sales are up 3.2% and aided by a positive FX tailwind. On a segment basis, strength in appliances, education, and outdoor products was offset by weakness in commercial and home solutions. 

Moving down to the earnings the news is mixed but still good in light of conditions. The company reported 300 basis points contractions in both GAAP and adjusted margins but less than what the market was expecting. The company reported GAAP earnings of $0.44 (missed by $0.02 due to debt repayments) while the adjusted $0.54 beat by a nickel. The silver lining is that margin contraction at the operating level is due to increased ad-spend as well as rising costs. The ad spend should result in sales. 

Looking forward, the company is expecting strength to continue into the 4th quarter and guided both revenue and earnings higher. The company is now expecting revenue in a range above the high end of the previous range and the analyst’s consensus with earnings at the top end of their previously stated range. 

JPMorgan Goes Overweight On Newell Brands 

The Marketbeat.com consensus sentiment for Newell Brands was bullish before JPMorgan’s upgrade but is more so now. The firm upgraded the stock to Overweight from Neutral with a price target of $27 stating the turnaround is taking hold. The $27 price target is shy of the Marketbeat.com consensus of $29 but still implies more than 20% of upside in the stock. 

Analyst Andrea Teixeira: "After four years on the sidelines with a Neutral rating because of the significant core sales and profitability declines since the challenged 2016 acquisition of Jarden, we feel more confident with the turnaround as management finalized the divestitures of non-core businesses in order to simplify operations and redeployed its cash flow into value accretive growth."

The Technical Outlook: The Bottom Is In For Newell Brands 

Shares of Newell Brands are up more than 5.0% since the Q3 results were released and look ready to move higher. Price action is confirming support and reversal at the $22 level and we see it moving higher from here. The indicators are in alignment with this move and suggest a move above the $24 level will happen soon. If price action can get above $24 we see it moving up toward the analyst’s consensus and possibly higher as results improve.