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Factors Likely to Decide Newell's (NWL) Fate in Q3 Earnings

Newell's (NWL) third-quarter 2021 earnings are most likely to have been hurt by inflation, and higher advertising and promotion costs. Its offerings in food and home fragrance are encouraging.

This story originally appeared on Zacks

Newell Brands Inc. NWL is expected to witness a year-over-year decline in the bottom line when it reports third-quarter 2021 earnings on Oct 29, before the opening bell. The Zacks Consensus Estimate for third-quarter earnings is pegged at 50 cents, which suggests a plunge of more than 40% from the year-ago quarter’s tally. The consensus mark has been stable in the past 30 days. The same for quarterly revenues stands at $2,781 million, indicating an increase of about 3% from the figure reported in the year-ago quarter.

A glance at this Atlanta, GA-based company’s performance in the trailing four quarters shows that it delivered a surprise of 61.6%, on average.

- Zacks

Key Factors to Note

Solid product offerings across categories like food and home fragrance along with improvement in the writing business might have boosted Newell sales in the third quarter. The company has been focusing on strengthening brands, developing omni-channel capabilities and tapping international growth opportunities for sometime now. Gains from robust e-commerce capabilities and resurgence in brick-and-mortar consumption might contribute to the results.

Such growth endeavors along with efforts to improve productivity and deepen customer engagement are likely to have aided the third-quarter performance.

On its last earnings call on Jul 30, management had projected net sales of $2.7-$2.78 billion with core sales ranging from flat to up 3% year over year for the third quarter.

However, the company has been witnessing elevated advertising and promotional expenses for a while. Also, transportation and labor costs remain headwinds. Management had earlier anticipated the to-be-reported quarter to be the peak period for inflation pressure. It further added that these challenges will strongly weigh on the company's margins.

Newell had earlier forecast a normalized operating margin of 10.3-10.8% for the impending quarterly results, down from the prior-year quarter’s reported figure of 14.9%. It cited that inflation as well as higher advertising and promotional spending will more than offset gains from volume leverage, productivity and pricing. Consequently, the company had envisioned normalized earnings per share of 46-50 cents for the third quarter.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Newell this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Newell Brands Inc. Price and EPS Surprise

Newell Brands Inc. Price and EPS Surprise

Newell Brands Inc. price-eps-surprise | Newell Brands Inc. Quote

Although Newell currently carries a Zacks Rank #3, its Earnings ESP of -1.34% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider as our model shows that these have the right combination of elements to beat on earnings this season:

Tyson Foods TSN currently has an Earnings ESP of +19.13% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

US Foods Holding USFD presently has an Earnings ESP of +5.26% and is Zacks #3 Ranked.

Hormel Foods HRL presently has an Earnings ESP of +1.59% and is a #3 Ranked player.

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