Newell Brands (NASDAQ: NWL) has been in the headlines for several reasons lately; not all good, but the takeaway for investors is that insiders and institutions are buying this stock. Among the negative headlines is that major shareholder Carl Icahh, through his various holdings, sold about 0.6% of the company in March, but this is offset by other news. To begin, Mr. Icahn still holds more than 7.25% of the company, and the other institutions are buying. The institutional activity has been bullish on balance for the last 3 consecutive quarters and has total ownership up to 92%. In this light, Mr. Icahn’s sales are noteworthy but not a bearish event to keep investors up at night.
Regarding the insiders, insider activity has been bearish for the last year, with director Brett Icahn making 2 of the 3 large sales that are recorded. A purchase by CFO Mark Erceg, who effectively doubled his holdings at the cost of $367,000, ended that trend. Whether or not this develops into a new trend is yet to be seen; until then, it is a vote of confidence this dividend-paying stock is worth a nibble.
Analysts Drive This Stock To New Lows
Analyst activity in Newell Brands has pushed the stock to long-term lows over the past year. The analysts' average rating has fallen to a Hold from Moderate Buy, with a price target trending lower. The consensus implies about a 38% of upside for the stock, but the most recent targets are below consensus, and the lowest assume some downside in action. The analysts are not expecting much from the Q1 report, which is due mid-May. The consensus revenue estimate is the lowest revenue the company has posted since 2019, and earnings are expected to be negative. This is concerning due to the dividend, but the company is well-capitalized and working to reposition for the times.
“Project Phoenix is expected to be substantially implemented by the end of 2023. It incorporates a variety of initiatives designed to simplify the organizational structure, streamline the company’s real estate, centralize its supply chain functions, which include manufacturing, distribution, transportation and customer service, transition to a unified One Newell go-to-market model in key international geographies, and otherwise reduce overhead costs,” said the company in the Q4 report.
Another concern is a credit-rating downgrade from S&P Global. The downgrade puts the company’s debt in junk territory, increasing its borrowing costs. The cause cited is a preference to return capital to shareholders instead of paying down debt. The company’s restructuring efforts are viewed as positive, but the increase in debt in the face of uncertain conditions created a credit risk in the eyes of the agency.
Newell Brands High-Yield Is Risky But Attractive
Newell Brands' high yield is risky but appears safe for now. The question is if the company can effect a rebound by the 2nd half of the year and ensure the payment and debt servicing are covered. If not, Newell could become the next to cut its distribution, sending shares even lower.
The stock shows support at the pandemic low, so the worst may be priced in already. In that scenario, price action may move sideways at the current levels. If not, this stock could fall through support at the $11 level and move to the longer-term lows near $6.50.