Digital Shift And Supply Woes Will Hamper Long Term Prospects

Key Takeaways

• Lagging adaptation to digital retail and rising competition from online private labels threaten revenue growth and long-term brand presence.
  
• Sustainability regulations, supply chain strains, and high leverage pressure margins and limit investment in innovation and marketing.
  
• Gross margin expansion, innovation, and supply chain investments are boosting revenue growth, pricing power, and financial flexibility, while international strength ensures diversified earnings.

Catalysts

Engages in the design, manufacture, sourcing, and distribution of consumer and commercial products worldwide.

• The persistent shift in consumer preference toward digital-first and e-commerce engagement disadvantages Newell's legacy retail-focused brands, and with continued rapid growth of online private labels, Newell risks sustained erosion of both top-line revenue and shelf presence in key categories.
  
• Growing regulatory and consumer scrutiny of sustainability, coupled with stricter plastics and packaging mandates, will drive up compliance costs across Newell's largely disposables-driven product lines, ultimately reducing future net margins and threatening competitiveness in core markets.
  
• Chronic supply chain complexity and inventory management challenges, including excess inventory build-ups and ongoing tariff volatility, are likely to force Newell into higher discounting and warehousing costs, resulting in long-term margin compression and weaker earnings stability.
  
• Sharply elevated leverage and ongoing interest expense, already above peers, sap Newell's ability to reinvest in innovation and marketing, leaving it vulnerable to rising rates, constrained cash flow, and further deterioration of earnings quality.
  
• Intensifying competition from private label and generic brands, together with mega-retailer consolidation and price wars, will continue to undermine branded premiumization efforts, suppressing pricing power and stalling revenue growth far below management's long-term aspirations.

Newell Brands Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Newell Brands compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Newell Brands's revenue will decrease by 0.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -3.3% today to 5.3% in 3 years time.
• The bearish analysts expect earnings to reach $391.9 million (and earnings per share of $0.84) by about August 2028, up from $-243.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 7.7x on those 2028 earnings, up from -10.2x today. This future PE is lower than the current PE for the US Consumer Durables industry at 11.8x.
• Analysts expect the number of shares outstanding to grow by 0.75% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Newell Brands Future Earnings Per Share Growth

Risks

• Newell Brands' significant progress in gross margin expansion, achieving its highest rate in four years and sustaining eight consecutive quarters of year-over-year improvement, suggests margin resilience and positions the company to deliver stronger net margins and earnings as category headwinds abate.
  
• The company's domestic manufacturing scale, nearly $2 billion invested in North American automation and supply chain capability, and tariff advantages have resulted in incremental business wins that are expected to materialize in both 2025 and 2026, supporting revenue growth as supply chain dynamics favor reshoring and domestic sourcing.
  
• Rebuilt innovation capabilities, now supported by strong consumer insights, brand management infrastructure, and a robust pipeline-including major launches like the Yankee Candle refresh-are driving incremental distribution gains and are likely to improve both sales and pricing power in key categories.
  
• International sales, comprising nearly 40% of total revenue, have delivered consistent core sales growth in recent quarters, with the Writing, Baby, and Home Fragrance segments showing particular strength, which buffers overall revenue and supports diversified earnings streams.
  
• Strategic cost reduction initiatives, successful refinancing efforts, and ongoing deleveraging (with a projected year-end leverage ratio reduction to 4.5x) should lower interest expense over time, enhance financial flexibility, and drive improvements in net income and return on equity.

Valuation

• The assumed bearish price target for Newell Brands is $5.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Newell Brands's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $9.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $7.3 billion, earnings will come to $391.9 million, and it would be trading on a PE ratio of 7.7x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $5.92, the bearish analyst price target of $5.0 is 18.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.