Should you invest in Newell Brands in Q3 as shares fall amid supply chain headwinds?

on Jul 30, 2021
  • Newell Brands shares plummeted more than 8% on Friday despite delivering a solid Q2 beat.
  • The company failed to raise guidance for Q3 amid rising inflation and supply chain challenges.
  • NWL shares are down more than 15% since peaking on 17th May. So should you buy or sell?

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

Newell Brands Inc. (NASDAQ:NWL) shares fell more than 8% on Friday after announcing its most recent quarterly results. The company beat analyst expectations on earnings by 24.63% after posting an EPS of $0.56, $0.11 better than the consensus Street estimate of $0.45.

Newell Brands’ revenue rose 28% to $2.7 billion from the same quarter a year ago, beating the average analyst estimate by $150 million. In addition, it raised the full-year 2021 revenue guidance to $10.1 billion to $10.35 billion, up from the previous forecast of $9.9 billion to $10.1 billion. As a result, the median of about $10.22 billion is significantly higher than the Street estimate of $10.11 billion.

However, Newell’s full-year bottom-line guidance of $1.63 to $1.73 per share falls short of the consensus analyst estimate of $1.73, with a median of about $1.68 earnings per share. The lower than expected EPS guidance coupled with management statement on rising inflation and supply chain constraints pushed the stock price lower.

Should you buy or sell Newell Brands now?

Newell’s falling stock price has pushed the valuation to attractive levels. As a result, the company’s shares now trade at a compelling P/E ratio of 17.75. In addition, its forward P/E of just 14.31 is also exciting despite this year’s forecast earnings decline of 513%.

Therefore, it would be best to wait for the stock price to fall further despite the attractive valuation multiples. In addition, although NWL beat Q2 expectations, there are no clear catalysts to initiate a rebound after citing potential inflation and supply chain headwinds.

Source – TradingView

Technical overview: Newell Brands stock price forecast for Q3 2021

Technically, the Newell Brands shares appear to have fallen closer to oversold conditions in the 14-day RSI. The stock also seems to have plunged to the trendline support in the descending channel. 

However, since it lacks fundamental catalysts for a rebound, NWL will likely continue falling in the coming days. As a result, investors can target extended declines at $24.18 and $23.31. On the other hand, $25.82 and $26.65 provide crucial short-term resistance.

Bottom line: the case for selling NWL shares

In summary, Newell Brands seems poised for continued downward movement following Friday’s pullback. Therefore, it would be best to wait for the stock to fall further before buying, or you may short NWL shares.