Getting and keeping brand recognition is a critical part of any business endeavor. There is an outfit in Atlanta that ranks among the best in achieving those goals. The company's product list is one of the best recognized anywhere.
Newell Rubbermaid (NYSE: NWL) manufactures and distributes a wide variety of consumer and commercial products. Offerings include a long list of well-known home and office brands, including Levolor blinds, Lenox hand tools, Sharpie pens, Rolodex record holders, Amerock cabinet hardware, DYMO label makers, Graco children's products and Rubbermaid items. Competitors include Avery Dennison (NYSE: AVY) and Fortune Brands (NYSE: FO).
The firm pleased investors earlier in the week, when it raised Q3 guidance. Management now sees EPS of 48-50 cents (45 cent consensus) and revenue growth near the high end of the previously estimated 5-7% range. Strength in the Home & Family and Tools & Hardware segments were cited in support of the adjustment. The company also boosted Y07 EPS guidance to $1.74-1.78 ($1.76 consensus).
The stock popped on the news and then began defining a bullish "flag" consolidation pattern. Stocks often leave flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the shares with three "strong buys," three "buys" and three "holds." Recent price targets are in the mid-$30s. The NWL P/E ratio (19.63), Price to Sales ratio (1.29), Price to Book ratio (3.96), Price to Cash Flow ratio (13.64), Price to Free Cash Flow ratio (23.81) and Return on Equity (22.02%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 84% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Through the past 12 months, it has traded between $24.22 and $32.19. A stop-loss of $24.95 looks good here. Note that the firm is expected to report Q3 results in late October.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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