Earnings Turnaround Could Lead To Newell Brands Stock Surging Past $30

Up 2.5x from its low in March 2020, at the current price of $28 per share, we believe Newell Brands stock (NASDAQ: NWL) has further upside potential. Newell Brands, a manufacturer and distributor of consumer products such as storage containers, bottles, outdoor products, writing materials, and glue among others, has seen its stock rise from $11 to $28 off its March 2020 low, much more than the S&P which increased by over 85% from its lows. Further, the stock is up around 40% from the level it was at before the pandemic. However, we believe that Newell Brands stock could rise at least 10% to new levels above its recent high of $30, driven by expectations of steady demand growth and strong Q1 2021 results. Our dashboard What Factors Drove 53% Change In Newell Brands Stock Between 2018 And Now? has the underlying numbers behind our thinking.

Newell Brands stock’s rise since late 2018 came despite a 4% drop in revenues from $10.15 billion in FY 2018 to $9.79 billion in FY 2020. Combined with a 11% drop in the outstanding share count, RPS (revenue-per-share) rose 8% from $21.40 to $22.20 over this period.

Further, Newell Brands’ P/S (price-to-sales) multiple rose from 0.8x in 2018 to 1x by 2020 end, and has since further risen to 1.2x. We believe that the company’s P/S ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of coronavirus and the resulting lockdowns have affected supply chain activities everywhere, affecting distribution of consumer goods. However, with the widespread vaccination drive and economies opening up worldwide, demand for Newell’s products is back on track. This is evident from the company’s Q1 2021 earnings, where revenue came in higher at $2.3 billion from $1.9 billion for the same period last year. Operating expenses rose at a rate slower than the growth in revenue, and adjusted operating income rose to $192 million from $67 million. Despite a higher effective tax rate, EPS came in significantly higher at $0.21 from -$3.02 for the same period last year.

Additionally, with the lockdowns being lifted and the steady continued growth in demand for household products, we believe the company’s revenues stand to benefit further in the medium term. Additionally, if the company is able to continue controlling expenses going forward, a rise in investor expectations could drive up the company’s P/S multiple. We believe that Newell Brands stock can rise at least 10% from current levels, to set new highs above $30.

While Newell Brands stock may move higher, it is helpful to know how its peers stack up. Newell Brands Stock Comparison With Peers summarizes how Newell Brands compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

 

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