Newell Brands Inc. (NWL) Gabelli Research Analyst Zamane Bodini (2-20-2018)
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Hi. My name is Zamane Bodini and I’m a consumer products analyst at Gabelli & Company. Today we are reviewing diversified consumer products company Newell Brand, headquartered in Hoboken, NJ.
The company has 491 million shares outstanding, trading at 27 dollars per share for an equity market cap of 13 billion dollars.
Over the last six months, Newell Brands’ share price has been cut in half as the positive momentum the company has achieved in market share gains and e-commerce growth has been overshadowed by inventory destocking, customer bankruptcies and input inflation. As a result, Newell Brands announced it is looking to sell ~25% of its portfolio by 2019, to align with the changing retail landscape and to create a focused portfolio.
We believe this is a step in the right direction as: 1) Newell Brands will be a faster growth, higher-margin company with $11 billion in sales and $2 billion in EBITDA in consumer centric categories; 2) the company will be simpler with its supply chain footprint and consumer base reduced by 50%, and 80% of sales consolidated into 2 ERP systems from 20 currently; 3) Newell will have a stronger balance sheet with $6-7 billion in gross proceeds coming in to pay down the company’s current net debt balance of $10.7 billion.
In closing, we continue to believe Newell Brands remains an attractive investment. Shares currently trade at 9.0x 2017E EBITDA and 9.2x earnings, a discount to its peers trading at 11-14x and 18-24x, respectively. We expect the discount to narrow as the company executes on its transformation plan and provides investors with clarity on its long term strategy. We calculate a private market value of $40 per share in 2018