This consumer products maker is increasing earnings, pays a dividend, and has been buying back stock.
Newell Rubbermaid Inc. (NWL)
from Wall Street Stock Forecaster
Newell Rubbermaid inc. (NWL) makes a variety of everyday items, such as trash cans and food-storage containers. These products are less interesting than smartphones or social media websites, and not newsworthy. So, many investors have overlooked Newell’s improving prospects.
The company is in the midst of a multi-year cost-cutting plan that will set it up for years of profitable growth. The savings are also giving it lots of cash for share buybacks and dividends.
Newell owns some the top brands in these markets, including Sharpie markers, Parker and Paper Mate pens, Calphalon cookware, Levolor blinds, Irwin tools and Graco car seats and strollers.
The recession forced consumers to spend less on household goods, and the company stopped making certain unprofitable products. As a result, its sales fell 13.8%, from $6.5 billion in 2008 to $5.6 billion in 2009. However, sales quickly recovered and reached $5.9 billion in 2012.
Over the past few years, Newell has aggressively restructured, including closing plants and merging distribution centers. Thanks to these savings, Newell’s earnings are on the rise. Newell earned $1.83 a share in 2013, but its profits should rise 12.1%, to $2.00 a share, in 2014.
Another key part of Newell’s plan is expansion in fast-growing markets like China and Latin America. Right now, international markets supply just a third of its sales, so there’s lots of room to grow.
Newell’s improving earnings are also letting it buy back more shares. In October 2013, it spent $350.0 million on repurchases under a special one-time program. It can still buy back an additional $43.2 million worth of shares under its regular plan, which expires in August 2014.
The stock trades at 15.0 times the 2014 forecast. That’s a moderate p/e ratio, particularly as the improving U.S. housing market spurs demand for household products like window blinds. Moreover, the company is making fewer items with plastic resins, which cuts its exposure to volatile oil prices.
Newell pays out just a third of its earnings as dividends. That gives it plenty of room to increase the payout in 2014.
Patrick McKeough, Wall Street Stock Forecaster, www.tsinetwork.ca, 888-292-0296, January 31, 2014