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Newell Rubbermaid Inc. NWL closed its previously announced buyout of Elmer’s Products, Inc. (“Elmer’s”) from a partner of Berwind Corporation, an investment management company.
Elmer’s, which is a producer of adhesive and cutting products used for creative activities in the classroom, at home or elsewhere – owns popular arts and craft brands like Elmer’s, Krazy Glue and X-Acto. Elmer’s distributes its Krazy Glue through a joint venture with Toagosei Chemical Co. Ltd.
Elmer’s leading brands will join Newell’s Paper Mate, Sharpie, Expo and Mr. Sketch brands that form part of its Writing segment. Further, these are likely to strengthen Newell’s existing product line that primarily caters to the back-to-school selling season.
This acquisition will not only enhance Newell’s back-to-school offerings, but also deliver synergies in distribution, cross-selling and merchandising. Newell expects gains from the acquisition to reflect in its earnings and operating margin for 2016. Moreover, in 2015, the leading adhesive producer is expected to generate sales of $240 million.
Newell also recently announced that it has initiated the sale process for its Levolor and Kirsch window coverings brands, within its decor business. The business, which is anticipated to generate sales of about $310 million in 2015, will continue to be reported under the company’s Home Solutions segment. However, it will be run as a stand-alone business till the sale is completed.
Further, Newell believes the acquisition of Elmer’s and the sale of its décor business will not impact its results this year due to the timing of completion of both transactions. Thus, management retained its guidance for 2015 which projects core sales growth in the range of 4%–5% and adjusted earnings per share of $2.14–$2.20.
Moreover, the company expects to provide its guidance for 2016, along with third-quarter 2015 results. The company anticipates 2016 earnings to bear marginal impact from these transactions as the accretion from the Elmer’s acquisition is likely to be partially offset by the planned sale of the décor business.
Newell currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Ollie’s Bargain Outlet Holdings, Inc. OLLI, carrying a Zacks Rank #2 (Buy). Other well-placed stocks in the broader consumer staples space include Constellation Brands Inc. STZ, with a Zacks Rank #1 (Strong Buy) and Diamond Foods, Inc. DMND, with a Zacks Rank #2.
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NEWELL RUBBERMD (NWL): Free Stock Analysis Report
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