NEWELL RUBBERMAID INC. $38(New York symbol NWL; Aggressive Growth and Income Portfolios, Consumer sector; Shares outstanding: 267.1 million; Market cap: $10.1 billion; Price-to-sales ratio: 1.7; Dividend yield: 2.0%; TSINetwork Rating: Average; www.newellrubbermaid.com) makes plastic storage bins, tools, pens and many other household goods. Its main brands include Sharpie markers, Parker and Paper Mate pens, Calphalon cookware, Irwin tools and Graco car seats and strollers.
Newell is up 26.7% since we named it our Stock of the Year for 2014 at $30. That’s mainly because of its successful multi-year cost-cutting plan, which included closing plants and merging distribution centres. Since it began the plan in October 2011, these moves have reduced its annual expenses by $360 million.
The company is also selling less-important businesses and using the proceeds to buy smaller firms with more-profitable products, such as baby strollers and reusable water bottles.
Sales rose from $5.86 billion 2011 to $5.90 billion in 2012, but fell to $5.69 billion in 2013. Sales then recovered to $5.73 billion in 2014 and $5.92 billion in 2015.
Earnings jumped 23.1%, from $1.17 a share (or a total of $336.3 million) in 2011 to $1.44 a share (or $420.1 million) in 2013. Earnings then declined to $1.33 a share (or $373.0 million) in 2014, and to $0.96 a share (or $259.3 million) in 2015. If you exclude unusual items, per-share earnings rose 9.0%, from $2.00 in 2014 to $2.18 in 2015.
Newell recently agreed to buy Jarden Corp. (New York symbol JAH), which makes a wide variety of consumer products, including Sunbeam kitchen appliances, Mr. Coffee coffee makers, Ball jars, Crock-Pot cookers and Rawlings baseball mitts.
Merger will nearly triple annual sales
The company will pay $11.8 billion (40% cash, 60% stock) for Jarden. Following the purchase, Newell shareholders will own 55% of the combined firm, which will change its name to Newell Brands. The new company will have $16 billion of annual revenue.
Newell held cash of $274.8 million at the end of 2015, so it plans to borrow about $5 billion to pay for this purchase. That will increase its long-term debt to around $7.7 billion, or a high 76% of its market cap.
However, by cutting overlapping operations, the new company should save $500 million annually by the end of the fourth year. In addition, Newell’s own restructuring plan should cut its annual costs by $620 million to $670 million by the end of 2017.
These savings should help it pay down the extra debt, and let it keep paying its current annual dividend rate of $0.76 a share. That makes for a yield of 2.0%.
The company expects to complete the Jarden acquisition in the second quarter of 2016. The combined firm will probably earn $2.78 a share this year, and the stock trades at a moderate 13.7 times that forecast.
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