Newell Brands: A Hidden Gem in the Market

Newell Brands, a consumer goods company, has faced declining revenue in recent years. However, the completion of its restructuring plan, "Project Phoenix," is expected to improve earnings per share. The company is now undervalued and positioned for growth, making it a buy at a bargain price.

Newell Brands (NASDAQ:NWL), a leading U.S. consumer and commercial products company, has been experiencing consistent revenue declines in recent years. However, the completion of "Project Phoenix," a strategic restructuring plan, is expected to fuel the company's positive earnings per share (EPS) outlook. The stock is currently trading at an 8.4x forward price-to-earnings (P/E) ratio, a significant discount compared to the 15.9x peer average and the 18.2x discretionary staples median [1]. This undervaluation reflects the company's $5.9B debt and declining revenue, making the stock less likely to witness a downturn. Given the company's long-term revenue and EPS growth potential, the current valuation levels present a potential upside.

Newell Brands operates in various household products categories, including writing and stationery, household and storage, outdoor and recreation, appliances and cookware, infant care products, and home fragrance. Its notable brands include Sharpie, Rubbermaid, Coleman, and Graco. The company's global footprint extends to over 150 countries. In 2023, Newell Brands introduced "Project Phoenix," which consolidates the company's five previous operating segments into a more streamlined structure of three segments to benefit from synergies and initiate cost savings.

The company's Q2 2025 results showed mixed signals, with revenue declining by 4.8% or $98MM, mainly due to softness in global demand. However, gross profit declined at a slower rate than revenue, and gross margin improved by one percentage point, driven by productivity gains and pricing actions [1]. Net income remained relatively flat, slightly up by $1MM, reflecting lower SG&A costs by $12MM. The company's forward dividend yield of 4.85% surpasses the discretionary sector median of 2.42% [1].

The consensus revenue is projected at $7.35B for 2025, a YoY decline of 3.1%, aligning with the YTD 5% decline compared to H1 2024. Revenue is expected to grow slightly for the period 2026-2029. The decline is partially offset by the back-to-school season and product innovations in the learning and development segment, such as Sharpie creative markers and Wet Erase markers. The company plans to invest more in marketing in the second half of 2025 to achieve a stronger return on investment for its advertising campaigns [1].

The outlook for the full year remains stable, with a positive outlook for 2026 & 2027, according to analysts. EPS is projected to remain within the $0.68 range like 2024, reflecting the projected revenue 3% YoY decline and improvements in profitability. The stability is driven by the ongoing cost restructuring program, which focuses on the largest and most profitable brands and top international markets [1].

The company's current TTM GAAP net margin is -3%, with a net loss of $243MM. However, the normalized TTM net income stands at $110MM, with a TTM net margin of 1.48%. This gives Newell Brands a low base for future growth. The company's recent debt issuance of $1.25B at an 8.5% rate, due in 2028, was oversubscribed by four times, signaling strong investor confidence [1].

Tariffs pose a risk that may impact the company's bottom line, potentially creating a risk of missing EPS estimates. The company's high leverage also poses a risk of suppressing the bottom line through high interest expenses. However, the discounted P/E and forward EV/EBITDA ratios highlight the undervaluation case for Newell Brands, making it a deep value play at its current forward P/E multiple [1].

References:
[1] https://seekingalpha.com/article/4816889-newell-brands-a-buy-at-a-bargain-price