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Mark Ketchum, the CEO and President of Newell Rubbermaid Inc (NYSE: NWL), bought 20,000 shares of his company's stock late last month, according to a SEC filing. Newell, which has been showing signs of beginning a sustainable turnaround, got hit hard in the recent stock market correction, with shares dropping from $30 to around $25, a 17% decline.
Investors are concerned that recent revenue growth is unsustainable and will weaken as the economy slows. However, in a report released this morning by Bank of America (NYSE: BAC), management believes the growth initiatives that have been put in place are taking hold and 3% to 5% revenue growth is doable despite the slowing macro environment. However, B of A is somewhat skeptical and maintained its Neutral rating and $28 price target.
Merrill Lynch & Co. (NYSE: MER), in a report released yesterday, wrote that investors should jump on board Newell's stock, as the correction has been overdone. Newell should earn $1.78 this year, jumping to $2.00 next year, implying price-to-earnings ratios of 14x and 12.7x for 2007 and 2008, respectively. This is cheap for a company owning such well-known franchise names as Rubbermaid, Sharpie, plus a whole host of others. Merrill has a $34 price target on Newell Rubbermaid.
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