Shares of Newell Brands(NASDAQ: NWL), the parent of brands like Rubbermaid and Elmer's, were heading lower today after the company posted solid fourth-quarter results but offered lackluster guidance for 2024.
As a result, the stock was down 16.6% as of 11:56 a.m. ET.
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Newell's cost-cutting plans are working
Newell said that revenue and core sales both fell 9% in the quarter. Net sales came in at $2.08 billion, which was still better than analysts' consensus estimate of $1.98 billion.
Despite the decline in revenue, gross margin improved from 26.3% to 29.9% after the company eliminated less profitable stock-keeping units (SKUs) in an attempt to improve cash flow, and adjusted gross margin jumped from 26.6% to 32.3%.
As a result of that focus on costs, adjusted operating margin improved from 4.9% to 7.7%, and adjusted earnings per share rose from $0.16 to $0.22, which exceeded the consensus estimate of $0.17.
CEO Chris Peterson said, "[W]e drove record productivity across the supply chain, significantly improved cash flow by rightsizing inventory, further reduced Newell's SKU count and took decisive actions to strengthen the company's front-end commercial capabilities, which are critical to returning Newell to sustainable and profitable growth."
Guidance disappoints investors
Looking ahead to 2024, Newell expects revenue to fall again by 5%-8%, while analysts had forecast a 4.3% decline. First-quarter guidance was also worse than hoped. The company sees sales dropping 8%-10% in Q1 and anticipates an adjusted loss of $0.05-$0.09 per share. Analysts were projecting a profit of $0.02 per share.
For the full year, Newell expects earnings of $0.52-$0.62 per share, which was also below the consensus of $0.77 and down from $0.79 in 2023.
The guidance shows that the company's turnaround is taking longer than hoped, and earnings are set to fall faster than anticipated. Given that change, it's understandable why the stock is down double digits today.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
