Analysts have slashed their estimates for Tupperware after the company missed the revenue estimates and lowered its guidance. As a result, the stock fell back to Zacks Rank # 5 (Strong Sell) yesterday.
About the Company
Tupperware Brands Corporation (NYSE:TUP) is a multi-brand, multi-category, relationship-based sales company. It primarily manufactures and sells preparation, storage, and serving solutions for the kitchen and home.
The company made its debut in 1946 and has now expanded its presence in almost 100 countries around the world. Its sales force consists of independent contractors who market products directly to consumers.
Disappointing Results and Guidance
On July 23, Tupperware announced the results for its Q2 of 2014. Net sales for the quarter were $674 million, below Street estimates and also short of management’s growth estimates. While emerging markets--accounting for 66% of sales--achieved a 10% increase in local currency terms, established markets were down 7% in local currency terms, largely driven by poor results in Germany.
According to the management, the quarter was challenging in several aspects with strong comparisons from prior year, as well as some external and internal challenges, particularly in Germany.
Net income (excluding foreign currency) was down 31% year-over-year. Adjusted diluted earnings of $1.47 per share (including $0.14 negative impact from changes in foreign exchange rates), however met the Street consensus.
The company also lowered its full-year earnings guidance to $5.40 to $5.50 per share from the previous guidance of $5.66 to $5.81 per share provided earlier in April.
Downward Revisions
Due to weak guidance, quarterly and annual estimates have been revised downwards in the past few weeks. Zacks consensus estimates for the current quarter and year are now $0.92 per share and $5.50 per share respectively down from $1.08 per share and $5.71 per share, 30 days ago.
Negative estimates revisions send the stock back to Zacks Rank # 5. In fact, it has been at # 4 or # 5 ranks since July.
Insiders Selling Shares
Three Tupperware executives including the Chairman & CEO sold more than 65,000 shares at an average of $74.06 each after the company’s second quarter results. In general, insider selling after a significant price decline is a negative sign for the company since it suggests that the insiders do not believe that the shares are hoping to rebound anytime soon.
The Bottom Line
While the stock looks attractive in terms of valuation, after its post-results sell-off, the company still faces many challenges in terms of organic sales growth. Until the management can show that the long-term growth story is still intact, investors may like to avoid the stock.
Better Play?
Investors looking for a better play in the Consumer Products industry could consider Newell Rubbermaid (NWL), a Zacks Rank # 2 (Buy) stock. The company reported strong results for its second quarter with higher sales and enhanced margins.
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Disclosure: None
