Newell Brands Inc. (NASDAQ: NWL) saw its shares climb 8.95% to close at $5.60 on Friday, following the company's first quarterly sales increase in over four years. The stock touched an intraday high of $7.13 before retreating, as investors weighed the quality of the earnings beat.
The company's second-quarter results showed a return to top-line growth, with net sales rising 3.0% to $2.0 billion and core sales up 2.3%. However, the earnings per share (EPS) beat was significantly aided by one-time tariff refunds, masking the underlying operational performance.
EPS Boost from Tariff Recoveries
Newell's normalized EPS for the quarter came in at $0.42, but this included a $0.17 recovery of 2025 tariff fees and a $0.04 recovery related to first-quarter 2026 tariffs. Excluding these items, normalized EPS was $0.21, just two cents above the company's guidance range of $0.16 to $0.19, but three cents below the $0.24 reported in the same quarter last year.
The company also raised its full-year normalized EPS guidance midpoint by 17 cents to $0.73-$0.77, but this increase was entirely due to the tariff reimbursements. Without the benefit, the outlook remains unchanged at $0.56-$0.60.
Sales Growth Broad-Based
Encouragingly, the sales recovery was widespread. Five of six business units reported growth, with U.S. net sales up approximately 5% and seven of the company's ten leading brands showing gains. The Learning & Development segment was a standout, with core sales up 4.9% and normalized margin expanding to 36.9% from 25.6% a year ago, driven by strong demand for Graco products.
The Home & Commercial Solutions segment saw a slight decline of 0.4% in core sales, while Outdoor & Recreation grew 3.7% but saw its margin contract to 3.8% from 5.6%.
Margin Expansion and Inflation Pressures
Normalized gross margin expanded by 520 basis points to 40.8%, but much of this was also tied to tariff recoveries. Management projects an underlying operating margin of 8.6% to 9.0%, up about 50 basis points from 2025, after adjusting for the one-time benefits.
Inflation remains a significant headwind, with the company more than doubling its expected cost pressure to approximately $200 million. However, CEO Chris Peterson noted that refunds and higher profitability should "effectively offset" this increase, reducing the need for "significant pricing action."
Balance Sheet and Leverage
The balance sheet remains constrained, with debt of $5.0 billion and net leverage down to 4.8 times from 5.5 times. Newell added an $800 million asset-backed revolver, extending overall maturity to 2031, and drew $490 million at closing.
Market Reaction and Outlook
Investors distinguished between operational improvements and the refund benefit, with shares ending 21.5% below their intraday high and giving up roughly 77% of the day's advance. Trading volume was four times the 65-day average at 44.3 million shares.
For the full year, Newell now expects net sales growth of 1% to 2% and core sales growth of 0% to 1%, up from prior guidance. The company also raised its operating cash flow outlook to approximately $400 million.
Key risks remain centered on inflation, leverage, and demand sustainability. Adjusted EPS was still lower year-over-year, and cash flow was negative as of June. The industry will get another read on consumer demand when Clorox reports after Monday's close.
