Newell Brands Third Quarter 2026 Earnings Conference Call - NEWELL BRANDS INC

Explicit Guidance:

• FY2026 Net Sales: Raised to 2–3% growth (previously 2–3% range).
• FY2026 Core Sales: Raised to 1–2% growth (previously 1–2% range).
• FY2026 Operating Margin: Maintained range of 10.0–10.4% normalized.
• FY2026 EPS: Midpoint maintained at $0.75 (range tightened to $0.74–$0.76); effective tax rate ~20%. Includes ~$100M (17 cents/share) one-time IEPA tariff recovery from 2025.
• Q4 2026 Net Sales: 1–3% growth.
• Q4 2026 Core Sales: 1–3% growth.
• Q4 2026 Operating Margin: 8.4–9.0% normalized.
• Q4 2026 EPS: $0.17–$0.19 normalized; effective tax rate in low single digits.
• FY2026 Operating Cash Flow: Revised to ~$150 million (down from $400M prior estimate) due to non-operating items; underlying operational pace remains ~$400M.
• FY2026 Capital Expenditures: Expected below $200 million (down from prior estimate of ~$200M).
• FY2026 Net Leverage: Target comfortably below 4.5x at year-end.
• FY2027 Inflation: Expected ~$150 million (vs. $220M in 2026); cumulative two-year impact ~8% of COGS.
• FY2027 Margin Outlook: Expected down vs. 2026 reported levels (due to removal of $100M tariff refund benefit); excluding that impact, normalized margins expected to rise >50 bps vs. 2026, targeting "evergreen" +50 bps improvement.
• FY2027 Sales: Base plan assumes global category growth flat to 2026; expects positive core sales growth driven by innovation and distribution.

Business-Segment Outlook:

• Writing & Development: Continued growth momentum expected post back-to-school; replenishment orders driven by strong POS.
• Baby Care: Flat core sales in Q3 was timing-driven; YTD growth remains high mid-single digits. Caution on baby gear pricing pending US-China "30 for 30" trade initiative; expects potential tariff relief to allow for price avoidance in 2027.
• Home & Commercial: Strong momentum expected; Commercial segment returning to growth (first time in 5 years); Home Fragrance (Yankee Candle) and Kitchen (Rubbermaid, Crock-Pot) showing double-digit or solid growth.
• Outdoor & Recreation: Q3 decline viewed as shipment timing; expected to bounce back to positive growth in Q4 and sustain in 2027.
• Innovation Volume: Steady state expected at ~25 Tier 1/Tier 2 launches annually; no expectation for further increase beyond current cadence.

Market and Competitive Outlook:

• Category Growth: FY2026 global category growth expected flat to -1% (improved 1–2 points from start-of-year view).
• Pricing Strategy: FY2027 pricing expected to be "modest" and "low to mid-single digit" on average; selectively applied based on cost structures and competitive environment. No "sticker shock" expected; likely timed to coincide with private label/competitor price moves.
• Competitive Landscape: Private label pricing moving up; price gaps narrowing. Newell not expected to lead pricing aggressively but follow market moves.
• Consumer Sentiment: Low-income consumers in U.S. spending bottoming out (decline narrowing from -10-15% YoY to -5%); high-income consumers spending more; middle-income flat. Holiday 2026 expected "decent" but not "blowout" due to cost of living pressures.

Macro / Industry Outlook:

• Inflation Drivers: FY2026 input cost inflation ~4.6% of COGS ($220M total); driven by diesel, transportation, resins, purchased products, and labor.
• 2027 Cost Assumptions: Assumption that oil/diesel and resin levels remain elevated; labor/wage inflation continuing.
• Trade Policy: Monitoring US-China "30 for 30" initiative details; potential relief for baby gear tariffs in 2027.
• Foreign Exchange: Favorable FX expected to continue supporting net sales growth relative to core.
• Middle East Situation: Ongoing direct and indirect effects on EMEA and APAC markets.

Strategic Initiatives:

• Atlanta Design Center: Opened September 2026; integrates design, insights, and R&D to accelerate innovation rates.
• ERP Consolidation: Completed global "One Newell" ERP rollout; simplifies operations and reduces future CapEx.
• Leadership Addition: Guillermo Bede hired as COO to unify sales, central marketing, supply chain, and procurement; aim to drive faster go-to-market.
• Deleveraging: New $800M ABL facility and $600M senior notes (6.25% coupon) used to refinance debt; short-term debt net position at zero; total debt + factoring expected to decline by ~$200M vs. 2025.
• Manufacturing: Continued investment in automated production lines yielding margin expansion ($0.45 on op margin per dollar invested).

Risks and Headwinds to Outlook:

• Inflation Volatility: Continued elevation in fuel, commodity, and labor costs could exceed $150M guidance in 2027.
• Trade Policy Uncertainty: Scope, timing, and extent of US-China tariff relief remain unconfirmed; delays could impact baby gear pricing strategy.
• Economic Softness: Middle-income consumer fragility and persistent cost of living pressures could limit holiday 2026 sales growth.
• Macroeconomic Instability: Volatile global category growth and effects of geopolitical tensions (Middle East) in EMEA/APAC.
• One-Time Items: Operating cash flow guidance reduced by non-recurring pension liquidation cash flow reporting and reduced receivables factoring capacity.

Management Tone on the Future:

• Confidence: High confidence in "third consecutive quarter of positive sales growth" and sustained profitable growth trajectory.
• Strategic Shift: Moving from "price-led" volume growth (2023-24) to "innovation-led" volume growth (2025-26) with selective, modest pricing in 2027.
• Agility: Planning for 2027 in an "agile manner" to adjust quickly to volatile macro scenarios.
• Financial Health: Confidence in deleveraging and improving cash conversion cycle; "flywheel" of sales growth now pushing through P&L.

Miscellaneous:

• Moody's Outlook: Revised from negative to stable; credit rating affirmed.
• Cash Conversion Cycle: Improved by 4 days YoY.
• Trailing 12-Month EBITDA: Up 20% YoY to $1.03 billion.