NEWELL RUBBERMAID INC. $26 (New York symbol NWL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 286.4 million; Market cap: $7.4 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.3%; TSINetwork Rating: Average; www.newellrubbermaid.com) makes plastic storage bins, tools, window blinds, pens and a number of other household items. Its top brands include Rubbermaid, Sharpie, Paper Mate, Parker, Graco, Waterman and Levolor.
The company has six divisions: Home Solutions makes foodstorage and cooking products (28% of Newell’s 2012 sales); Writing makes pens and markers (24%); Tools makes hand and power tools, as well as accessories (14%); Commercial Products makes cleaning products (13%); Baby & Parenting makes high chairs, car seats and other products for infants (12%); and Specialty makes a variety of products, such as window blinds and paint brushes (9%). Wal-Mart accounts for around 11% of Newell’s sales.
Newell’s sales fell 13.8%, from $6.5 billion in 2008 to $5.6 billion in 2009, mainly because consumers cut spending during the recession. As well, Newell stopped making certain unprofitable products. However, sales rebounded to $5.9 billion in 2012.
Even with the lower sales, Newell’s earnings rose 47.7%, from $338.7 million in 2008 to $500.3 million in 2012. Earnings per share rose 39.3%, from $1.22 to $1.70, on more shares outstanding.
These gains mainly resulted from a multi-year restructuring plan, in which Newell streamlined its manufacturing operations and phased out unprofitable products. These savings have helped the company handle rising costs, including for plastic resins made from oil.
The savings have also helped strengthen Newell’s balance sheet. In 2012, it cut its long-term debt by 5.7%, to $1.7 billion (or 23% of its market cap) from $1.8 billion a year earlier. Newell also held cash of $183.8 million, or $0.64 a share, at the end of 2012.
The company has identified more ways to cut its costs, including merging warehouses and moving computer systems to a common platform. These moves should cut its annual costs by $90 million to $100 million in 2013. Its savings should rise to between $270 million and $325 million a year when Newell completes the plan in 2015.
New products will boost sales
Besides cutting costs, Newell aims to launch new products to spur its long-term growth; in 2012, it spent $125.4 million, or 2.1% of its sales, on research. Recent launches include over 150 new tools under the Hilmor brand for the fast-growing heating, ventilation and air-conditioning market.
Newell also aims to increase its international sales, which accounted for 32% of its total revenue. It’s particularly interested in Asia and Latin America.
The stock has gained over 38% in the past year. Even so, it trades at a reasonable 14.4 times the $1.81 a share that the company will probably earn in 2013. Newell has also raised its dividend twice in the past year. The current annual rate of $0.60 yields 2.3%.
Newell Rubbermaid is a buy.
