Newell Brands (NWL) is in plenty of trouble. The company reported fourth quarter revenue falling 6%, which gave bears fuel when the stock fell 21% on Friday, Feb. 15. Will NWL stock re-test the $15 Nov. 2018 low and if it does, what happens after that?
Short float on Newell stock stood at ~10%. The slightest of bad news in the earnings report gave bears the momentum to send the stock towards a $15 yearly low next. Fundamentally, Newell management has a de-levering of the balance sheet to finish. This will halt any rebound in the business but will cut debt down to a manageable ratio.
Management said it will cut costs through its Accelerated Transformation Plan divestitures. For the year, and helped by the divestiture of Jostens Inc., Newell returned $1 billion to investors through a buyback and dividend. Total asset sales for the year was $5 billion, after tax.
Debt dropped and is at its targeted leverage ratio of 3.5 times. Cash flow fell by half, to $498 million, due to the asset sales for the year.
2019 Plan
Newell raised its asset sale target to $10 billion, up from $9 billion. This deleveraging is not without risk because the core business cannot face a recession, which would hurt cash flow. But if the economy improves and Newell sells assets at a good price, the stock could recover after re-testing yearly lows.
