Newell Brands (NWL) is up about 13% as I write this after reporting fourth-quarter earnings this morning. Earnings per share came in $0.10 above expectations, which is all it takes to make Wall Street happy.
While higher costs continue to pressure margins, the company had a surprising 4% increase in revenues in the quarter, compared to expectations of a 1% decline.
Admittedly, management acknowledges that early ordering by retailers due to supply chain concerns helped the fourth quarter, leaving January looking a little soft. However, business rebounded in February and NWL now expects sales to grow 2% to 4% for the first quarter.
Again, that’s evidently enough for Wall Street. I believe what got the stock really going today was management’s comments that they were ready to begin share repurchases now that the company’s debt is manageable.
With the stock still selling at only 13X this year’s EPS estimates, share repurchases should be very accretive to earnings and add could upside to earnings per share. Either way, there is still plenty of room for the stock to run.
I am raising my target to NWL to $30 while maintaining my $24 buy under price. The 4% dividend yield will add to total returns.