Newell Brands tumbles on outlook

Newell Brands announces resignation of three directors from board

Newell Brands exploring portfolio reconfiguration to simplify operations

Newell Brands tumbles on outlook, Stockwinners.com
Newell Brands tumbles on outlook

Newell Brands (NWL) announced preliminary estimated results for 2017.

The company currently anticipates core sales growth of approximately 0.8%, down from previous guidance 1.5% to 2.0%, and normalized EPS in the range of $2.72-$2.76, down from previous guidance $2.80-$2.85.

Sees approximately $1B of operating cash flow generated in the fourth quarter of 2017, resulting in full year operating cash flow of approximately $930M, versus previous guidance of $700M-$800M.

The company’s core sales results were impacted by an acceleration of the gap between sell-in and sell-through results due to a continuation of retailer inventory rebalancing in the U.S. and the bankruptcy of a leading baby retailer.

Margins were impacted by the negative mix effect of lower Writing sales and a reduction of fixed cost absorption due to shorter cycle runs on self-manufactured products, designed to reduce inventories and maximize operating cash flow.

Newell Brands CEO says majority of brands performing well despite difficult 2H17

“We believe that exiting non-strategic assets, reducing complexity and focusing on our key consumer-focused brands will make us more effective at unlocking value and responding to the fast-changing retail environment,” said Michael Polk, Newell Brands CEO.

“Despite a very difficult commercial outcome in the second half of 2017, the vast majority of our brands are performing well in the marketplace.

Our e-commerce business grew at a strong double-digit pace, our market shares have continued to increase and sell-through growth has accelerated with Q4 2017 growth rates ahead of Q3 2017 in the U.S., which strengthens our confidence in our brand, design and innovation-led strategy.

Importantly, our early efforts to improve working capital metrics look to have yielded good results with operating cash flow of nearly $1 billion dollars in Q4, despite the increased margin pressure from planned downtime in our factories and input cost inflation. We are committed to achieving our transformation objectives and are taking decisive action with speed to adapt our agenda to the unprecedented volatility in our retailer landscape,” Polk added.

PORTFOLIO CHANGES

Newell Brands announced that it will explore a series of strategic initiatives to accelerate its transformation plan, improve operational performance and enhance shareholder value.

Key components include: Focusing Newell’s portfolio on nine core consumer divisions with approximately $11B in net sales and $2B of EBITDA;

Exploring strategic options for industrial and commercial product assets, including Waddington, Process Solutions, Rubbermaid Commercial Products and Mapa;

Exploring strategic options for the smaller consumer businesses, including Rawlings, Goody, Rubbermaid Outdoor, Closet, Refuse and Garage, and U.S. Playing Cards;

Newell Brands exploring portfolio reconfiguration to simplify operations. Stockwinners.com
Newell Brands exploring portfolio reconfiguration

 

Execution of these strategic options would result in a significant reduction in operational complexity through a 50% reduction in the company’s global factory and warehouse footprint, a 50% reduction in its customer base and the consolidation of 80% of global sales on two ERP platforms by end of 2019.

If fully actioned, Newell Brands would expect to be an approximately $11B focused portfolio of leading consumer-facing brands with attractive margins and growth potential in global categories. These brands would leverage the company’s advantaged capabilities in brands, innovation, design and e-commerce.

The company expects proceeds after tax to be greater than that required to achieve a leverage ratio below the lower end of its current leverage ratio target range.

Newell Brands intends to begin the evaluation process immediately and expects any resulting transactions to be completed by the end of 2019.

DOWNGRADES

Barclays analyst Lauren #Lieberman downgraded Newell Brands to Equal Weight from Overweight and cut her price target for the shares to $26 from $35.

“Put simply, we’ve lost confidence,” the analyst says following this morning’s preannounced Q4, announced strategic overhaul and departure of certain board members.

Lieberman has concerns given the scale of Newell’s transformation expected in 2018. She also sees a lack of visibility around cash flow.

SunTrust said Newell reset the bar with a number of announcements today announcing Q4 results, below consensus 2018 guidance, a new strategic initiative to simplify its portfolio, and BOD changes.

The firm’s analyst actually views today’s announcements as a positive and said the news makes shares even more investable for 2018.

NWL is down 22% to $24.20.


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Dick’s Sporting shares may have topped

Dick’s Sporting dips despite fifth upgrade this month

Dick's Sporting dips, Stockwinners.com
Dick’s Sporting dips

This morning, Telsey Advisory analyst Joseph Feldman upgraded Dick’s Sporting Goods (DKS) to Outperform as he expects industry pressures will stabilize. Since the beginning of the month, four other Wall Street analysts have upgraded the stock to buy-equivalent ratings, citing better sector trends and benefits from new U.S. tax reforms.

BUY DICK’S SPORTING

In a research note to investors, Telsey Advisory‘s Feldman upgraded Dick’s Sporting Goods to Outperform from Neutral and raised his price target on the shares to $42 from $25 as he adjusted his earnings per share estimates for the benefit from tax reform.

While the analyst acknowledged that the company is currently in a period of earnings pressure due to price competition on athletic apparel and footwear, driven by increased distribution to new channels such as department stores and online and too much inventory, he expects industry trends to stabilize in the second quarter of 2018, leading to better results for Dick’s Sporting in the second half of the year.

BETTER INDUSTRY TRENDS

Earlier this week, Susquehanna analyst Sam Poser also upgraded Dick’s Sporting to Positive from Neutral, saying the company’s results should surprise to the upside given a low bar and “less worse” weather driven sales trends.

The analyst said he continues to believe Dick’s needs to proactively take control of its business and focus on customer engagement rather than succumb to the promotional environment.

Overall, #Poser contended that better than expected earnings, starting with the fourth quarter of 2017 results and continuing with 2018, will drive shares higher.

The analyst also raised his price target on the sock to $41 from $25. Last week, his peer at Buckingham had upgraded Dick’s Sporting to Buy from Neutral, with a $39 price target, citing tax reform benefits and recent strength across retail.

Back on January 12, Deutsche Bank analyst Mike #Baker also upgraded Dick’s Sporting Goods to Buy, while raising his price target on the shares to $39 from $33.

The analyst told investors he sees industry trends bottoming, inventory levels coming back into balance with demand and therefore lessen the impact on gross margins, and reduced risk to margin forecasts as models already reflect increased investment spending.

Wells Fargo analyst Ike #Boruchow was the first to upgrade the stock this month to Outperform back on January 3, saying the outlook for Dick’s is improving.

The analyst noted that high-level industry trends appear to be stabilizing, and the company has already re-based 2018 numbers in a “prudently conservative manner.”

Further, with the consolidation occurring in the sporting goods industry, Dick’s Sporting can continue to take market share from struggling brick-and-mortar competitors and be the “survivor” of the industry’s consolidation, he contended.

Additionally, the analyst pointed out that as a 100% domestic retailer with a high tax rate, the company is a key potential beneficiary of U.S. tax reform. Boruchow raised his price target on the shares to $35 from $26.

PRICE ACTION

In Thursday morning’s trading, shares of Dick’s Sporting (DKS) have dropped over 1% to $33.36. However, over the last month Dick’s shares are up nearly 13%.


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Biogen to acquire KPT-350 from Karyopharm

Karyopharm enters agreement for Biogen to acquire KPT-350

Karyopharm enters agreement for Biogen to acquire KPT-350, Stockwinners.com
Karyopharm enters agreement for Biogen to acquire KPT-350

Karyopharm Therapeutics (KPTI) announced its entry into an agreement for Biogen (BIIB) to acquire Karyopharm’s investigational oral SINE compound KPT-350 and other assets for the treatment of certain neurological and neurodegenerative conditions.

KPT-350 is a novel therapeutic candidate that works by inhibiting XPO1, resulting in reductions in inflammation and neurotoxicity, as well as increasing neuroprotective responses.

Under the terms of the agreement, Biogen is acquiring KPT-350 and other assets targeting certain neurological conditions, including amyotrophic lateral sclerosis.

In exchange, Karyopharm will receive a one-time upfront payment of $10M from Biogen and is eligible to receive additional payments of up to $207M based on the achievement by Biogen of future specified development and commercial milestones.

Karyopharm will also be eligible to receive tiered royalty payments from Biogen that reach low double digits based on future net sales of specified product candidates, including KPT-350.

KPTI closed at $10.45.


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Summit Therapeutics reports positive data on its DMD treatment

Treatment with ezutromid reduced muscle damage by 23%

Summit Therapeutics reports positive DMD data, Stockwinners.com
Summit Therapeutics reports positive DMD data

Summit Therapeutics plc (SMMT), the drug discovery and development company advancing therapies for rare diseases and infectious diseases, today announces positive 24-week interim results from the open-label Phase 2 proof of concept clinical trial, PhaseOut DMD.

PhaseOut DMD is evaluating the utrophin modulator ezutromid in patients with Duchenne muscular dystrophy (‘DMD’). The focus of the planned interim analysis was on biopsy measures that show:

  • Treatment with ezutromid resulted in a statistically significant and meaningful reduction in muscle damage as measured by a 23% decrease in mean developmental myosin in muscle biopsies at 24 weeks compared to baseline. Developmental myosin is a biomarker of muscle damage and is found in repairing fibres.
  • A total of 14 of 22 patients showed a decrease in developmental myosin, with five of those showing a greater than 40% reduction.
  • Increase in mean utrophin protein intensity levels of 7% in biopsies at 24 weeks compared to baseline.

The combination of reduced muscle fibre damage and increased levels of utrophin provides the first evidence of ezutromid target engagement and proof of mechanism.

DMD is caused by genetic faults that prevent muscle cells from making dystrophin, a protein that maintains the structure and healthy functioning of muscles.

The absence of dystrophin, as seen in patients with DMD, leads to a catastrophic cycle of muscle damage and repair.

Utrophin protein performs a similar role to dystrophin in developing and repairing muscle fibres.

As a muscle fibre matures, utrophin is switched off and replaced by dystrophin in the case of healthy individuals. During the early stages of natural muscle repair, utrophin and developmental myosin are expressed concurrently, and are then slowly switched off.

Ezutromid aims to maintain utrophin expression in patients with DMD so it can substitute for the lack of dystrophin and break this cycle.

SMMT closed at $12.21, it last traded at $15.25.


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