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Newell Rubbermaid Inc. (NYSE:NWL) is scheduled to release its first-quarter 2011 results on Friday, April 29, 2011. The Zacks Consensus Estimate for the quarter is pegged at 28 cents a share, depicting an estimated year-over-year increase of 12%.

Fourth Quarter & Fiscal 2010 Recap

Newell Rubbermaid logged a strong 26.0% growth in fourth quarter 2010 earnings to net 34 cents a share from 27 cents a share in the year-ago quarter. Earnings also outpaced the Zacks Consensus Estimate of 32 cents a share. Including special items, earnings per share came in at 25 cents a share. The strong quarterly performance was mainly attributable to increased core sales and improved productivity.

For fiscal 2010, Newell recorded earnings per share of $1.52 compared with $1.31 per share in the prior year. Results also beat the Zacks Consensus Estimate of $1.50 per share.

During the quarter, Newell recorded a modest 3.4% year-over-year jump in net sales to gross $1,469.3 million, beating the Zacks Consensus Estimate of $1,451.0 million. Core sales of the company improved 4.9% for the quarter.

For fiscal 2010, net sales upped 3.3% to $5,759.2 million from $5,577.6 million in fiscal 2009. It also outdid the Zacks Consensus Estimate of $5,743.0. Core sales of the company increased 4.7% for the year.

Fiscal Year 2011 Guidance

Newell expects core sales to augment in the 4%–5% range in fiscal 2011. Better productivity, mix and pricing are expected to fully offset the impact of higher input cost inflation. Accordingly, gross margin expansion of 50–75 basis points is on the cards for fiscal 2011.

The company expects its 2011 adjusted earnings to range between $1.67 and $1.70 per share. The Zacks Consensus Estimate of $1.69 per share, constant over the past 2 months, is within the guided range.

Agreement of Analysts

In the last 30 days, out of the 16 analysts covering the stock, 2 of the analysts moved their estimates in the upward direction while none moved in the downward direction for the first quarter of fiscal 2011. In the last 7 days, none of the analysts revisited their estimates, keeping the consensus unchanged.

For fiscal 2011, out of the 16 analysts covering the stock, 1 analyst increased the estimate while 2 analysts lowered theirs. In the last 7 days, 1 analyst decreased the estimate while none moved in the opposite direction.

Magnitude of Estimate Revisions

With no effect from earnings revisions by the analysts in the last 7 days and 30 days, the Zacks Consensus Estimates for the first quarter and fiscal 2011 remain unchanged at 28 cents and $1.69 per share, respectively.

Surprise History

With respect to earnings surprises, Newell showed a favorable trend in the last four quarters. The company has recorded positive surprises in the trailing four quarters with a low of 2.4% and a high of 38.9%. On an average, the earnings surprise was a positive 15.9%. Based on the current flow, we expect the company to come up with healthy results in the upcoming quarter.

Our Recommendation

Newell Rubbermaid is one of the leading manufacturers of home and office products in the U.S. The company also possesses a strong portfolio of well established brands, such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. Based on its strong brand portfolio, Newell Rubbermaid can expect robust earnings, should the market scenario change for the better.

The company is in the midst of a multi-year global restructuring program aimed at improving productivity, reducing overheads, streamlining distribution and transportation processes and exiting low-margined product categories. The program is aimed at realizing annualized savings in excess of $200 million. Consequently, Newell Rubbermaid can expect a steady improvement in its bottom line in the future.

On the flip side, Newell Rubbermaid faces intense competition from numerous manufacturers and distributors of consumer and commercial products, such as Jarden Corp. (NYSE:JAH), Fortune Brands Inc. (FO), Cooper Industries plc (CBE) and Avery Dennison Corporation (NYSE:AVY).

The company is heavily dependent on a handful of customers, which includes large discounters, department stores, home centers, warehouse clubs and office superstores. This considerably reduces Newell Rubbermaid’s pricing power against these giant retailers, thereby exerting pressure on margins and limiting profitability.

Due to its exposure to international markets, Newell also remains prone to currency fluctuation. The weakening of foreign currencies against the U.S. dollar may require the company to either lower prices or book lower profit margins in locations outside the U.S.

Newell Rubbermaid currently has a short-term Zacks #3 Rank (Hold) rating that corresponds with our long-term Neutral recommendation on the stock.

Source: Newell Rubbermaid: Earnings Preview