The competitive landscape is already difficult enough but the revised outlook is "worrisome," Grundy commented in the downgrade note. The cost of operating the business is now "clearly moving higher" and any ongoing benefit from Elmer, which provided more than 50 percent of second-quarter growth will "ultimately wane."
Of particular note, 70 percent of Newell Brands' business is U.S.-based and topline pressures in the flagship market will likely persist moving forward. On top of that, the company's own comments at a recent investor conference (on Sept. 6 and 7) "underscored the company's expectations for continued sluggish market growth" in fiscal 2018.
Given the ongoing concerns, there is reason to be skeptical the company will be able to hit the consensus estimate for fiscal 2018 of $3.43, Grundy also noted. A more accurate figure for the year would be in the $3.30 per share range with no reason to believe the company's prospects won't turn around next year.
Finally, one of the bullish reasons to own the stock in the past was the company's $500 million cost saving plan which would result in around 50 cents in EPS to drop to the bottom line. But now much of the expected savings will be reinvested in the business and used to offset input cost inflation.
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