While most may not recognize the name Newell Brands (NWL), they’ll recognize its products. This consumer appliance maker is the name behind Crockpot, Mr. Coffee, and many more. The company lost 2.9% in Friday’s premarket trading but recovered most of its losses halfway into Friday’s trading session. The biggest issue was a mixed-bag earnings report.
Adjusted earnings came out to $0.57 per share, which readily beat Zacks projections calling for $0.47 per share. However, the company fell slightly short on revenue, coming in at $2.53 billion against Zacks’ call for $2.54 billion.
Additionally, guidance proved disappointing, as the company looked to bring in between $2.39 billion and $2.5 billion. Zacks projections looked for $2.58 billion.
The past year for Newell Brands has been volatile but within a pretty close range. The company hovered between $18 and $24 per share over the previous 12 months. Currently, the company is down around the $20 mark.
Newell Brands has an incredibly diverse product line, but the problem here is that it’s diverse in the same way – consumer-centric. Given what the consumer is already enduring and what it’s likely to endure in the near term, I’m neutral on Newell Brands.
It will probably see a further drop in the face of the current macroeconomic environment. Its product line diversification will insulate it somewhat, but it’s still likely to take some hits.
Investor Sentiment is as Mixed as Earnings
Here’s where things get really complex. On TipRanks, NWL has a 5 out of 10 on the Smart Score rating. That’s just about perfect neutral and suggests Newell has just as much chance to lag the broader market as it does of outperforming it. Meanwhile, looking at the individual metrics of investor sentiment will show plenty of mixed signals as well.
Based on the TipRanks 13-F Tracker, hedge fund involvement reveals that hedge funds pulled back slightly on their connection to Newell Brands. I emphasize “slightly” here. Hedge funds sold three million shares, which objectively sounds like a big number.
That is, however, until you discover that it’s a drop from 77.6 million shares to 74.6 million shares. Hedge funds are not running for the door. They’re basically rebalancing.
Meanwhile, the insider trading picture is somewhat different. There have been no informative sales or purchases in the last three months. In fact, you have to go back to April to find any insider purchases. The last informative move was made five months ago when Carl Icahn sold off some stock.
In absolute terms, Newell Brands’ insiders have been heavily buy-weighted over the last year. There were 14 buy transactions staged in the last 12 months. There was only one sell transaction: Icahn’s.
Meanwhile, retail investors are starting to pull back, but only a bit. The number of TipRanks portfolios that hold Newell Brands decreased 0.6% in the last seven days. However, portfolios holding Newell are up 4.8% in the previous 30 days.
Finally, there’s Newell Brands’ dividend history to consider. It’s one of the more stable dividend histories around. Perhaps a bit too stable for income investors’ liking. Newell Brands has maintained a dividend of $0.23 per share for the last three years. This includes the worst of the pandemic and the increasing inflation we’ve seen lately.
Newell Brands is One Big Puzzle
Perhaps the biggest problem about Newell Brands is that it’s rather hard to figure, at least viscerally. The company seems to have a win up its sleeve for every loss. Its dividend is stable, which was great during the pandemic but not so good in the face of rising prices. Hedge funds are pulling back, but insiders are buying. Even analysts are split on whether or not the company is a Buy or a Hold, though no one seems interested in selling.
That might be the biggest thing to say about Newell Brands. No one wants to sell except for Carl Icahn, of course, but one sale in a pile of buys is, statistically, more an anomaly than a trend.
It certainly helps that Newell has been raising its earnings per share figures; over the last year, that figure went from $1.41 to $1.73, which will likely give holders and buyers encouragement.
It also helps that Newell Brands holds so many names under its umbrella. While the current environment isn’t great for any retail as customers hold back, Newell tends to make the kinds of things that customers have a hard time living without.
It’s easy not to buy a new television this year. Even if the old one dies, there might be smaller replacements or even different kinds of screens like computer monitors or smartphones. When the Mr. Coffee dies, or when the Crockpot goes on the fritz, customers tend to buy new.
There’s very little in the way of replacement options; switching to tea or using roaster pans just isn’t an option for some consumers.
Moreover, Newell Brands’ products tend to support a cost-cutting lifestyle. We’ve all heard about the “latte factor” in investing. Making your own coffee at home is a definite cost saving over buying lattes out, so having a Mr. Coffee can be a cost savings generator.
The whole function of sales is to convince a customer that a product or service will generate more value than the value of the cash currently held by said customer. That’s Newell’s entire value proposition in a nutshell: this coffee maker costs $45, but you’ll save $3 on every cup you make at home.
Indeed, customers will work to make do in poor economic conditions. A trip to the grocery store or the gas pump proves we’re in just those kinds of conditions. That’s going to hurt Newell Brands somewhat, but Newell will also be helped by bad conditions as customers look to cut costs and buy Newell products that aid in that.
Wall Street’s Take on NWL
Turning to Wall Street, Newell Brands has a Moderate Buy consensus rating. That’s based on three Buys and four Holds assigned in the past three months. The average Newell Brands price target of $25 implies 23.09% upside potential.
Analyst price targets range from a low of $20 per share to a high of $35 per share.
Conclusion: Hold On to Newell as the Macro Environment Shifts
Newell Brands will likely suffer under the new macroeconomic environment. Customers may well postpone purchases of new kitchenware as they struggle to pay for the raw food goods that would go into those devices. However, Newell also represents a cost-cutting strategy that other customers will embrace. This is why I’m neutral on Newell Brands. For every benefit, there is a drawback waiting to counter it.
That leaves Newell on both sides of the fence at once. That’s not necessarily an environment worth buying into, but it’s also likely not a good plan to abandon ship, either.
