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It has been about a month since the last earnings report for Newell Brands (NWL). Shares have lost about 8.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Newell Brands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Newell Brands Beats Q2 Earnings & Sales Estimates
Newell Brandsreported better-than-expected second-quarter 2020 results. However, both the bottom and top lines declined year over year. Despite the challenging economic situation surrounding the coronavirus outbreak, the company has witnessed an improving top-line trend and robust consumption patterns.
Moreover, e-commerce performed well with core sales growth in June. Also, it is progressing well with its turnaround plans such as SKU reduction efforts, Project FUEL and other cost-cutting actions.
However, Newell Brands withdrew its 2020 outlook due to uncertain COVID-19 impacts such as supply-chain disruptions, soft demand and macroeconomic headwinds.
Q2 Highlights
Newell’s second-quarter normalized earnings per share were 30 cents, which outpaced the Zacks Consensus Estimate of 18 cents. However, the metric fell 30.2% from 43 cents earned in the year-ago period.
Net sales declined 14.9% year over year to $2,111 million but surpassed the Zacks Consensus Estimate of $2,030 million. The year-over-year fall resulted from foreign-currency headwinds, supply-chain disruptions stemming from COVID-19 and soft core sales, which dropped 12.6%.
Normalized gross margin and operating margin contracted 330 basis points (bps) and 200 bps to 31.6% and 10.2% in the quarter under review, respectively.
Segmental Performance
The Appliances & Cookware segment (including Writing and Baby) recorded net sales of $359 million in the second quarter, down 0.8% from the prior-year number. The downside can be attributable to unfavorable foreign currency, which more than offset the segment’s core sales growth of 6.1%.
Net sales at the Home & Outdoor Living segment (including Outdoor & Recreation, Home Fragrance, and Connected Home & Security) totaled $355 million, declining 4.6% from the prior-year period. The segment’s top line was hurt by unfavorable currency and a 1.9% decline in core sales. Despite positive core sales growth in the Food business unit, a decline in Home Fragrance as a result of temporary closure of all North American retail stores due to the COVID-19 pandemic hurt segmental growth.
The Learnings and Development segment recorded net sales of $631 million, which fell 25.7% from the prior-year number. This resulted from a 23.5% decline in core sales and currency headwinds.
Net sales at the Commercial Solution segment were $413 million, which fell 9% on core sales decline of 6.8% and adverse currency. Further, sluggishness in Connected Home & Security more than offset the positive core sales trend at the Commercial business unit.
The Outdoor and Recreation segment recorded net sales of $353 million, which decreased 20.3% from the prior-year number. This resulted from a 21.5% decline in core sales and currency headwinds.