Every Thursday we bring you one of our best U.S. stock picks. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, most often from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster.
Newell uses oil to make its products, so it stands to gain from the almost 60% drop in crude prices since June 2014. And even when oil rebounds, it will continue to benefit from recent acquisitions and its high market share.
NEWELL RUBBERMAID INC. (New York symbol NWL; www.newellrubbermaid.com) makes plastic storage bins, tools, window blinds, pens and many other household goods.
The company makes most of its products from oil-based resins, so it stands to gain from the recent drop in oil prices.
Newell continues to streamline its manufacturing and distribution operations, which should cut $270 million from its annual costs by mid-2015. The company now feels it can save an additional $200 million a year by the end of 2017.
These savings have freed up cash for acquisitions; Newell recently paid $312.9 million for Ignite Holdings, a private firm that makes reusable water bottles and thermal mugs. The company also bought Baby Jogger Holdings, a privately held maker of premium baby strollers and accessories, for $210 million.
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Stocks to buy: Newell expects 20% earnings boost from new businesses
In the three months ended September 30, 2014, Newell’s sales rose 1.3%, to $1.48 billion from $1.46 billion a year earlier. Excluding exchange rates and acquisitions, sales gained 2.7%.
Earnings improved 5.1%, to $159.2 million from $151.5 million. Per-share earnings rose 11.5%, to $0.58 from $0.52, on fewer shares outstanding.
Newell’s long-term debt of $1.4 billion is a moderate 15% of its market cap. It also holds cash of $132.6 million, or $0.49 a share.
The company’s new businesses should increase its earnings by 20.0%, from a likely $2.00 a share in 2014 to $2.20 in 2015. The stock trades at 15.9 times the 2015 forecast. The $0.68 dividend yields 1.9%.
Newell is a buy recommendation of our advisory on U.S. investing, Wall Street Stock Forecaster.
Tomorrow in our Q&A we look at a Canadian firm whose flight systems may be more in demand after two Asian crashes.
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