Brands Newell Inc.. NWL has completed the sale of the Connected Home & Security (“CH&S”) business to Resideo Technologies, Inc.. REZI in a deal worth $593 million. As a global provider of home security solutions as well as a distributor of commercial and residential security, Resideo will benefit from the extensive portfolio of smoke, carbon monoxide (“CO”) detectors, connected fire and CO devices, fire extinguishers , suppressor fire detectors and other home security solutions. These products are sold under the BRK, Onelink and First Alert brands.
In 2021, the CH&S business achieved revenue of approximately $395 million. Notably, the addition of the First Alert brand should complement REZI’s current sensor solutions offering. Additionally, First Alert’s distribution channel, experienced workforce and strong e-commerce and retail operations will be accretive.
The net proceeds from this sale will likely be used to reduce Newell Brand’s debt and fund share buybacks to maintain its current debt ratio. Continuing these lines, NWL announced a $375 million share buyback program, effective immediately. The divestment decision will also help Newell Brands focus on core categories. However, the disposal is expected to have a neutral impact on the company’s normalized earnings per share in 2022.
Newell Brand benefited from strong demand, product innovations and solid base sales growth. In the fourth quarter of 2021, net sales increased 4.3% year-over-year, driven by base sales growth of 5.8%, as six of eight business units and each key region recorded an increase in base sales. This is the sixth consecutive quarter of core sales growth. On a two-year basis, base sales grew in every business unit.
This Zacks #3 (Hold) company is seeing continued strength online, supported by online shopping and in-store pickup and ship-from-store services. As a result, the e-commerce business saw low double-digit sales growth, accounting for nearly 22% of total sales in 2021.
Healthy consumer trends in the United States also bode well. Domestic consumption increased in all eight business categories of the company on a two-year basis, with double-digit growth in writing, food, childcare, trade, household appliances and fragrances interior in the fourth quarter.
Driven by the aforementioned factors, management released guidance for the first quarter and 2022. The company forecasts net sales of $9.93 billion to $10.13 billion for 2022, with base sales flat at 2%. Normalized operating margin should be 11.5 to 11.8%. Normalized earnings per share are estimated between $1.85 and $1.93 for 2022.
For the first quarter, net sales are expected to be between $2.25 billion and $2.30 billion, with base sales growth of 2-4%. For the quarter, the company expects normalized operating margin of 8.9 to 9.3 percent and normalized earnings of 26 to 28 cents per share.
Image source: Zacks Investment Research
Although NWL shares are down 1.1% year-to-date, they have outpaced the industry’s 14% decline.
Here’s how the top-ranked stocks fared
Some higher ranked stocks in the Consumer Staples sector are flower food BLF and McCormick & Company MKC.
Flower Foods is involved in baked food products and produces a wide range of breads, buns, buns, cupcakes and tortillas. He currently has a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ consensus estimate for Flower Foods’ current-year sales and earnings suggests growth of 7.2% and 4%, respectively, from numbers reported a year ago. FLO has a four-quarter earnings surprise of 9%, on average.
McCormick is a leading manufacturer, marketer and marketer of spices, seasonings, specialty foods and flavors. He also currently wears a No. 2 Zacks rank.
Zacks’ consensus estimate for McCormick’s current-year sales and EPS suggests growth of 5% and 3.9%, respectively, from numbers reported a year ago. MKC has a last four quarter earnings surprise of 7.3% on average.
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report