Editor’s note: This column is part of our Best Stocks for 2017 contest. Hilary Kramer’s pick for the contest is Newell Brands Inc (NYSE:NWL).
The crux of my investing philosophy is finding companies willing to take risks to raise their bottom line. For some companies, that means innovating new and unique technology; for others, cornering a highly specific market niche. But for Newell Brands Inc (NYSE:NWL), my pick for this year’s Best Stocks of 2017 contest, much of the risk has come from its expansive list of mergers and acquisitions (M&A).
Newell Brands is a global consumer goods company with a wide portfolio of well-known brands, including Elmer’s glue, Sharpie markers, Yankee Candle and Paper Mate pens.
It’s the kind of company that has benefited from spreading its reach as wide as it can go, curating a diverse palette of home-related staples under its umbrella.
Late last year, NWL stock announced it would be acquiring Jarden for $15 billion. While some bears balked at the price tag, it was pretty clear that the two companies were more or less a perfect match. Many of their separate product lines complement each other nicely, like Newell’s Graco car seats and Jarden’s Nuk baby bottles, for example.
The acquisition of Jarden has driven significant improvement in operating results in 2016, with the company realizing 3%-4% unit growth, along with improved earnings and cash flow. That strength was evident in its most recent earnings report, in which the company lifted the low end of its 2016 guidance and topped estimates by 5 cents.
Cost savings from the merger should also continue to ease margins in the years ahead.
Bottom Line for NWL Stock
Since the election, money has rotated out of more defensive sectors and into pockets like financials and industrials.
As a result, the shares have fallen to a very attractive 15X 2017 EPS high-end estimates of $3.05, an improvement from the expected $2.90 this year.
Recent performance has been uneven, but I view this more as a bullish buying opportunity than a reason to stay away.
While EPS growth will be limited in 2017 due to management’s decision to sell off some lower-growth businesses, I think these portfolio changes will ultimately unlock a much higher stock multiple in the long-term.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.