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Newell Brands Inc. (NASDAQ:NWL) has been in a long-term downtrend for the last several years. I have been patiently waiting for an entry point to take a long position. During that time, I have made some great money on the stock by buying put options. Well, I believe the time upon us to enter into a bull position. Reasons for this are discussed below.
NWL's one and six-month trends finally turned bullish this week and jumped higher off its $15 support level. Make no mistake, NWL is still a weak stock, but it has technically turned stronger.
Their RSI is above 50, which is generally positive. The MACD is above its signal line and positive. The stock is also trading above both its 20 and 50-day moving averages at 14.98 and 15.34, respectively.
NWL's quarterly earnings of $0.14 per share beat estimates of approximately $0.06 per share. Same quarter last year, earnings were $0.34 per share.
As noted in their quarterly statement, net sales were $1.7 billion, compared to $1.8 billion in the prior year period, mostly due to foreign exchange and a decline in core sales. Gross margins also failed to impress at 31.8% compared to 33.4% in the same period a year ago. The consensus estimate was $1.71 billion. As a result of less bad news, the stock got a nice pop that day. However, most of that gap up was filled on the downside over the next 10 days. See below graph.
Is Their Dividend Safe?
There was some speculation that NWL would need to cut their dividend. At this point, it looks like that is not going to happen in the near term. They are doing a decent job on keeping their massive debt in check (I would like to see it a lot lower) and managing share buybacks as well.
The company is paying down its debt, buying back stock, divesting of non-core business and continues on its transformation plans. While they paid too much for Jarden (in my opinion), their brands are known and used worldwide, and I do not see that changing in the near term. While the China/USA trade fears are a factor, I believe those have also been factored into the current price. As those issues are resolved, as well as their transformation results unfold, we should see the end to the long-term slide of the stock.
I discussed a short-term bull call spread trade with subscribers of my Seeking Alpha service - Financial Freedom Insights. Effectively, the trade has a breakeven at the current market price with about a 67% upside in the next month. For more details, check out my service.
While a weak stock, the technicals have turned bullish. As such, I have placed a bull call spread that expires in June. If you have questions for me, please let me know.
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Disclosure: I am/we are long NWL AS DESCRIBED. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article is intended to provide educational information to readers and in no way constitutes investment advice. Investing in public securities is speculative and involves risk, including possible loss of principal. The reader of this article must determine whether or not any investments mentioned in this article are suitable for their portfolio, risk tolerance, and accepts responsibility for their decisions. Neither information nor any opinion expressed in this article constitutes a solicitation, an offer or a recommendation to buy, sell, or dispose of any investment or to provide any investment advice or service. An opinion in this article can change at any time without notice.