Sales are down 14.1% and earnings fell 10.1% in the most recent quarter, but a restructuring plan aims to stem the declines and turn around the company.
A dividend cut has also freed up cash for new investments, while leaving a high 5.5% yield.
The stock trades at just 4.9 times the company’s 2019 earnings forecast.
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TUPPERWARE BRANDS CORP. (New York symbol TUP; www.tupperwarebrands.com) makes consumer goods such as plastic food and beverage containers, and cosmetics and fragrances. It sells these products through 3.1 million independent dealers; that keeps its distribution costs down.
In the quarter ended December 29, 2018, Tupperware’s sales fell 14.1%, to $505.9 million from $588.6 million a year earlier. That missed the consensus forecast of $542.5 million.
Tupperware gets 90% of its revenue from outside the U.S., and the high U.S. dollar hurt the contributions of its overseas operations. If you adjust for currency rates, sales in the quarter fell 7%.
Earnings before unusual items declined 10.1%, to $64.8 million from $72.1 million. Due to fewer shares outstanding, earnings per share fell just 5.7%, to $1.33 from $1.41. That matched the consensus estimate.
The lower sales and earnings were largely due to weaker demand for consumer goods in China and other parts of Asia.
Value Stocks: Restructuring should cut costs and free up cash for investments
The company subsequently announced that it would invest $100 million through 2022 on developing products and expanding its salesforce. Tupperware will also streamline its operations. These initiatives should save it $50 million a year. That’s in addition to the company’s current restructuring plan, which includes job cuts and plant closures. It alone should save $35 million a year by the end of 2019.
Following that plan (and if you exclude related costs), Tupperware’s earnings in the first quarter of 2019 fell 1.1%, to $0.90 a share from $0.91 a year earlier. The company gets 69% of its sales from emerging markets, so if you factor our currency rates, earnings per share gained 12.5%.
Sales in the quarter fell 10.2%, to $487.3 million from $542.6 million. Without currency rates, sales fell just 2%.
To free up cash for its new investments, Tupperware cut its dividend by 60.3%, to $0.27 a share from $0.68. The new annual rate of $1.08 yields a high 5.5% after the stock fell 30% after the dividend cut.
The company should earn $4.00 a share for all of 2019. The stock trades at just 4.9 times that estimate.
Any time a company cuts its dividend, it should be a matter of concern for an investor. There are many companies with attractive yields that may not be suitable for investment. I would wait to see how the initiatives affect the stock price. I would not invest until the stock price passes above the 50 day moving average of $22. Once that happens, that would provide an indication that the stock is recovering.
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Any time a company cuts its dividend, it should be a matter of concern for an investor. There are many companies with attractive yields that may not be suitable for investment. I would wait to see how the initiatives affect the stock price. I would not invest until the stock price passes above the 50 day moving average of $22. Once that happens, that would provide an indication that the stock is recovering.
Thank you, Shiv. It always pays to look closely at high yields.