Newell Brands Inc. (NWL) Bundle
Understanding Newell Brands Inc. (NWL) Revenue Streams
Understanding Newell Brands Inc.’s Revenue Streams
Newell Brands Inc. generates revenue through several primary segments, including Home and Commercial Solutions, Learning and Development, and Outdoor and Recreation. Each segment contributes differently to the overall revenue, reflecting varying market conditions and product demands.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Net Sales (in millions) | Q3 2023 Net Sales (in millions) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Home and Commercial Solutions | $1,047 | $1,123 | ($76) | (6.8%) |
| Learning and Development | $717 | $694 | $23 | 3.3% |
| Outdoor and Recreation | $183 | $231 | ($48) | (20.8%) |
| Total Revenue | $1,947 | $2,048 | ($101) | (4.9%) |
Year-over-Year Revenue Growth Rate
The company reported a decrease in net sales for the nine months ended September 30, 2024, with total revenue of $5,633 million, compared to $6,057 million for the same period in 2023, reflecting a 7.0% decrease. The decline was primarily due to soft global demand, net distribution losses, and product line exits.
Contribution of Different Business Segments to Overall Revenue
| Segment | 9 Months Ended September 30, 2024 (in millions) | 9 Months Ended September 30, 2023 (in millions) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Home and Commercial Solutions | $2,902 | $3,152 | ($250) | (7.9%) |
| Learning and Development | $2,089 | $2,071 | $18 | 0.9% |
| Outdoor and Recreation | $642 | $834 | ($192) | (23.0%) |
Analysis of Significant Changes in Revenue Streams
The most notable change in revenue streams occurred in the Outdoor and Recreation segment, which saw a 23.0% decline in net sales for the nine months ended September 30, 2024, primarily due to soft global demand and distribution losses. Meanwhile, the Learning and Development segment managed a slight increase in net sales, attributed to growth in the Baby business, despite a downturn in the Writing business.
Overall, the company faced challenges across its segments, with foreign currency impacts further affecting revenue negatively, especially in the Home and Commercial Solutions segment which also experienced a 4% unfavorable impact due to currency changes.
A Deep Dive into Newell Brands Inc. (NWL) Profitability
Profitability Metrics
In evaluating the financial health of the company, it's essential to analyze key profitability metrics such as gross profit, operating profit, and net profit margins. These metrics provide insights into the company's efficiency in generating profit relative to its revenue.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company's financial performance was as follows:
| Metric | 2024 | 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Sales | $1,947 million | $2,048 million | $(101) million | (4.9)% |
| Gross Profit | $679 million | $621 million | $58 million | 9.3% |
| Gross Margin | 34.9% | 30.3% | 4.6% | 15.2% |
| Operating Loss | $(121) million | $(159) million | $38 million | 23.9% |
| Operating Margin | (6.2)% | (7.8)% | 1.6% | 20.5% |
| Net Loss | $(198) million | $(218) million | $20 million | 9.2% |
For the nine months ended September 30, 2024, the profitability metrics are as follows:
| Metric | 2024 | 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Sales | $5,633 million | $6,057 million | $(424) million | (7.0)% |
| Gross Profit | $1,882 million | $1,732 million | $150 million | 8.7% |
| Gross Margin | 33.4% | 28.6% | 4.8% | 16.8% |
| Operating Income (Loss) | $58 million | $(75) million | $133 million | NM |
| Operating Margin | 1.0% | (1.2)% | 2.2% | NM |
| Net Loss | $(162) million | $(302) million | $140 million | 46.4% |
Trends in Profitability Over Time
The recent trends indicate an improvement in gross profit and gross margin, particularly in the latter part of 2024, compared to the previous year. The operating loss narrowed significantly due to cost management and restructuring efforts, resulting in a positive operating income for the nine months ended September 30, 2024.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the gross margin of 34.9% for Q3 is above the industry average of approximately 30%, indicating strong pricing power and cost management. The operating margin of 1.0% for the nine months is below the industry average of 5%, reflecting ongoing challenges in operational efficiency. The net margin of -2.8% contrasts with the industry average of 2%, showing the need for continued focus on profitability.
Analysis of Operational Efficiency
The company has made strides in operational efficiency, as evidenced by a decrease in restructuring-related costs from $131 million in the nine months ended September 30, 2023, to $87 million in the same period of 2024. Furthermore, gross productivity improvements contributed to a gross margin increase from 28.6% to 33.4% over the year.
Debt vs. Equity: How Newell Brands Inc. (NWL) Finances Its Growth
Debt vs. Equity: How Newell Brands Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Newell Brands Inc. reported a total debt of $4.961 billion, comprised of both short-term and long-term debt. The breakdown is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Short-term debt and current portion of long-term debt | $869 |
| Long-term debt | $4,092 |
| Total Debt | $4,961 |
The company’s short-term debt increased from $329 million at the end of 2023 to $869 million by September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio is a crucial indicator of a company's financial leverage. As of September 30, 2024, Newell Brands Inc. had a debt-to-equity ratio of approximately 1.74, calculated as follows:
| Total Debt (in millions) | Total Equity (in millions) | Debt-to-Equity Ratio |
|---|---|---|
| $4,961 | $2,860 | 1.74 |
This ratio is higher than the industry average of around 1.5, indicating a more aggressive approach to financing through debt compared to peers.
Recent Debt Issuances and Credit Ratings
In February 2024, both Moody’s and S&P downgraded the company’s senior unsecured debt rating to Ba3 and BB-, respectively. This downgrade resulted in an interest rate increase of 25 basis points for its outstanding senior notes totaling approximately $3.1 billion, leading to an expected annual increase in interest expense of about $16 million.
Balancing Debt Financing and Equity Funding
Newell Brands Inc. has been actively managing its capital structure to balance debt financing with equity funding. As of September 30, 2024, the company had cash and cash equivalents of approximately $494 million, which provides some liquidity against its debt obligations. The company's strategy involves utilizing its cash flow to pay down debt while also maintaining sufficient equity to support operational needs.
In the first nine months of 2024, Newell reported an operating income of $58 million, reflecting improved gross profit margins, which could contribute to future debt repayment capabilities.
Assessing Newell Brands Inc. (NWL) Liquidity
Assessing Newell Brands Inc.'s Liquidity
Current and Quick Ratios
The current ratio for Newell Brands Inc. as of September 30, 2024, is 0.99, calculated as total current assets of $3.362 billion divided by total current liabilities of $3.402 billion. The quick ratio, which excludes inventories from current assets, is 0.49, with quick assets of $1.710 billion (current assets minus inventories of $1.652 billion).
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is negative at -$40 million, reflecting a decrease from the previous year, where working capital was $457 million. The decline indicates a tightening liquidity position, driven by an increase in current liabilities.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash flows are as follows:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Operating Activities | $346 | $679 | ($333) |
| Investing Activities | ($107) | ($147) | $40 |
| Financing Activities | ($64) | ($405) | $341 |
| Net Cash Increase | $160 | $119 | $41 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company has $494 million in cash and cash equivalents, with a significant portion ($403 million) held by non-U.S. subsidiaries. The company also has a $1.0 billion Credit Revolver, with $170 million drawn and approximately $801 million available for borrowing. However, the recent downgrade in debt ratings by Moody's and S&P has increased interest expenses by approximately $16 million annually, which could further strain liquidity.
Is Newell Brands Inc. (NWL) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of Newell Brands Inc. (NWL), we will examine various financial ratios, stock price trends, dividend metrics, and analyst opinions.
Price-to-Earnings (P/E) Ratio
As of the latest financial reports, Newell Brands has a P/E ratio of approximately −11.76, reflecting a negative earnings scenario due to recent losses.
Price-to-Book (P/B) Ratio
The P/B ratio stands at approximately 1.47, indicating that the stock is trading at a premium compared to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently around 8.93, suggesting that the company is valued at nearly nine times its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price of Newell Brands has shown significant volatility:
- 12-month high: $17.83
- 12-month low: $10.16
- Current stock price (as of the latest report): $12.90
Dividend Yield and Payout Ratios
The company has a dividend yield of approximately 1.62% with a payout ratio of −8.63%, indicating that dividends are being paid despite ongoing losses.
Analyst Consensus on Stock Valuation
According to market analysts, the consensus rating for Newell Brands is a Hold, with a price target averaging $13.50. Analysts suggest caution given the company's recent financial performance and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | −11.76 |
| P/B Ratio | 1.47 |
| EV/EBITDA Ratio | 8.93 |
| 12-Month High | $17.83 |
| 12-Month Low | $10.16 |
| Current Stock Price | $12.90 |
| Dividend Yield | 1.62% |
| Payout Ratio | −8.63% |
| Analyst Consensus | Hold |
| Average Price Target | $13.50 |
Key Risks Facing Newell Brands Inc. (NWL)
Key Risks Facing Newell Brands Inc.
The financial health of the company is influenced by various internal and external risk factors. These include competitive pressures, regulatory changes, and overall market conditions.
Industry Competition
The company faces intense competition in the consumer goods sector, particularly from both established brands and new entrants. In the third quarter of 2024, net sales decreased by 5%, totaling $1.947 billion compared to $2.048 billion in the prior year. This decline reflects soft global demand and net distribution losses, which are exacerbated by competitive pricing pressures.
Regulatory Changes
Regulatory compliance poses a significant risk, especially in terms of environmental regulations and product safety standards. Recent filings indicate that any changes in these regulations could lead to increased operational costs or even product recalls, affecting the overall financial performance.
Market Conditions
Market conditions are volatile, influenced by factors such as inflation and changing consumer preferences. The company reported that changes in foreign currency adversely impacted net sales by $57 million, or 3%, in the latest quarter. This volatility can affect both pricing strategies and profit margins.
Operational Risks
Operational challenges are also a concern, particularly with restructuring initiatives. For the three months ended September 30, 2024, the company incurred restructuring and related costs of $22 million, down from $41 million in the previous year. These costs are primarily associated with facility closures and realignment plans.
Financial Risks
Financial risks include increased interest expenses due to recent downgrades in debt ratings. In February 2024, Moody’s and S&P downgraded the company's senior unsecured debt rating, resulting in an interest rate increase of 25 basis points, which is projected to add approximately $16 million annually to interest expenses.
Strategic Risks
Strategically, the company faces risks related to its product portfolio, particularly as it exits certain product lines. In the nine months ended September 30, 2024, the company reported a net loss of $162 million, a significant improvement from a loss of $302 million in the same period the prior year, but still indicative of ongoing challenges.
Mitigation Strategies
The company has taken steps to address these risks, including strengthening its balance sheet and improving liquidity. At September 30, 2024, cash and cash equivalents stood at $494 million, providing a buffer against operational and market uncertainties.
| Risk Factor | Impact | Current Status | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Sales Decrease | Net sales of $1.947 billion (Q3 2024) | Restructuring initiatives |
| Regulatory Changes | Increased Compliance Costs | Ongoing monitoring of regulations | Compliance programs |
| Market Conditions | Sales Impact from Currency Changes | Currency impact of $57 million (Q3 2024) | Pricing adjustments |
| Operational Risks | Restructuring Costs | $22 million (Q3 2024) | Realignment Plans |
| Financial Risks | Increased Interest Expenses | Projected $16 million increase | Debt management strategies |
| Strategic Risks | Product Line Exits | Net loss of $162 million (9M 2024) | Focus on core products |
Future Growth Prospects for Newell Brands Inc. (NWL)
Future Growth Prospects for Newell Brands Inc.
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product Innovations: The company has focused on introducing new products, particularly in the Learning and Development segment, which saw a net sales increase of 3.3% in Q3 2024 compared to Q3 2023, reaching $717 million in net sales.
- Market Expansions: Efforts to expand into international markets have been noted, with pricing actions taken to offset inflation and currency impacts that affected net sales by $57 million or 3% in Q3 2024.
- Acquisitions: The company remains open to strategic acquisitions that align with its growth strategy, particularly in segments experiencing high demand.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth projections are influenced by various factors including market trends and product performance. The company reported:
| Period | Net Sales (in millions) | Change from Previous Year |
|---|---|---|
| Q3 2024 | $1,947 | (4.9%) |
| Q3 2023 | $2,048 | - |
| Nine Months Ended Sept 30, 2024 | $5,633 | (7.0%) |
| Nine Months Ended Sept 30, 2023 | $6,057 | - |
Strategic Initiatives or Partnerships that May Drive Future Growth
The company is actively pursuing several strategic initiatives:
- Project Phoenix: This restructuring initiative aims to streamline operations and reduce costs, which has already contributed to improved operating income.
- Collaborations with Major Retailers: Strengthening partnerships with major retailers has led to favorable order timing and increased visibility for new products.
Competitive Advantages that Position the Company for Growth
The company holds several competitive advantages:
- Diverse Product Portfolio: The company boasts a wide range of products across multiple segments, including Home and Commercial Solutions, Learning and Development, and Outdoor and Recreation, which provides resilience against market fluctuations.
- Strong Brand Recognition: Established brands such as Rubbermaid and Coleman enhance customer loyalty and market penetration.
- Operational Efficiency: Cost-saving measures and productivity improvements have positioned the company to maintain higher gross margins, with Q3 2024 gross margin reported at 34.9%, up from 30.3% in Q3 2023.
Newell Brands Inc. (NWL) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Newell Brands Inc. (NWL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Newell Brands Inc. (NWL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Newell Brands Inc. (NWL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.