Newell beats; outlook not as bad as feared

Newell beats; outlook not as bad as feared

Stock Market Predictions

NEW YORK (Global Markets) - Newell Rubbermaid Inc (NWL.N) beat Wall Street's lowered quarterly profit and sales expectations as strength in Latin America and Asia Pacific offset weak demand in United States and Europe, sending its shares up almost 9 percent.

The results echoed those from other consumer products makers. Big gains in Latin America covered up U.S. declines at Colgate-Palmolive (CL.N) and Avon Products (AVP.N) as well.

Newell, the maker of Sharpie markers and Rubbermaid storage containers, had already lowered the bar for its new chief executive officer -- former Unilever (ULVR.L) executive Michael Polk. In early June, it predicted a weak second quarter and slashed its 2011 forecast, prompting a 12 percent slide in its shares.

On Friday, investors overlooked the consumer product maker's second profit warning in two months, pushing the stock up 8 percent to $15.51. The stock is still trading below where it was before the June 3 warning.

"The revised guidance is not a surprise in the current economic environment," BMO Capital Markets analyst Connie Maneaty said, adding that the new CEO would likely want to have achievable targets.

The company now expects to earn $1.55 to $1.62 a share this year, excluding items, down from the lowered forecast of $1.60 to $1.67 given just eight weeks ago.

The latest forecast is "slightly above" the $1.50 to $1.55 or so that many analysts were anticipating, said JPMorgan analyst John Faucher.

The average Wall Street forecast is $1.58 per share, according to Thomson Global Markets I/B/E/S.

SHOWTIME FOR NEW CEO

Polk, who joined Newell in mid-July, was not responsible for the second-quarter performance.

Now he is trying to set the company's future tone, including some price increases that Newell asserts are necessary even as shoppers contend with economic woes.

"The consumer environment remains very tough," Polk said. "The debt crisis in the U.S. and across many countries in Europe could further stress consumer confidence."

Despite the uncertain sales climate, the company -- which counts Target Corp (TGT.N), Staples Inc (SPLS.O) and Williams-Sonoma (WSM.N) as customers -- raised its prices again in July as it pays more for oil, resin and other necessities.

As prices have gone up, the company is seeing some consumers buy less, as it expected, Polk said.

The company is well-positioned for the back-to-school season, Polk said. However the "key uncertainty is whether the consumer will show up and spend."

TAKING DOWN SALES EXPECTATIONS

Oppenheimer analyst Joe Altobello was more skeptical about Newell's sales prospects for the rest of the year and concerned about rising commodity costs. He rated Newell's shares at "perform" despite what he called a "reasonable" valuation.

Newell forecast core sales growth of 1 percent to 3 percent, down from its previous forecast of 3 percent to 4 percent. Core sales exclude foreign currency impact.

Net income rose to $146.7 million, or 49 cents a share, in the second quarter, from $130.4 million, or 41 cents a share, a year earlier.

Excluding items, the company earned 46 cents a share, beating the analysts' average estimate of 42 cents, according to Thomson Global Markets I/B/E/S.

Net sales rose 5.1 percent to $1.57 billion, while analysts expected $1.55 billion.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn, Derek Caney and Gunna Dickson)