Newell Rubbermaid Inc. (NWL), the manufacturer of Sharpie pens, is using cost cutting to boost the bottom line. The company has surprised on estimates 4 quarters in a row by an average of 48.87%. NWL is an attractive value stock with a forward P/E of just 9.

Company Description

Newell Rubbermaid manufactures many well-known consumer products under the brands Rubbermaid, Sharpie, Graco, Calphalon, Levolor, Waterman, and Goody, to name just a few. The company is divided into three segments: Home & Family; Office Products; and Tools, Hardware & Commercial Products.

Newell’s brands are widespread, with more than 90% of all U.S. households use at least one of the company’s products. Newell has sales in more than 90 countries.

Cost Cutting Boosts First Quarter

On Apr 30, Newell Rubbermaid reported first-quarter 2009 results which surprised on analysts’ estimates by 150%. Adjusted earnings per share were 20 cents while analysts expected just 8 cents. EPS was 26 cents in the year ago period.

Like other consumer-driven companies, sales fell by 16% year over year to $1.2 billion from $1.43 billion. Core sales declined by 10%, with 50% of that fueled by tighter inventory management by customers and 50% driven by lower consumer spending.

The company responded to the change in market conditions by aggressively cutting costs with the result that Newell beat its own projected guidance for the quarter.

Full Year Guidance Affirmed

Given the results of the first quarter, the company reaffirmed its prior full year guidance of $1.00 to $1.25 per share with a net sales decline of 10% to 15%.

For the second quarter, Newell expects net sales to fall about 20% as customers maintain lower inventories and consumer spending continues to be weak. Earnings per share are forecast to be in the range of 30 to 37 cents.

Consensus Estimates Rise

After Newell easily beat first quarter estimates and reaffirmed full year guidance, covering analysts moved to adjust estimates. For the full year, estimates climbed by 13% to $1.13, which is in the middle of the company’s guidance range.

Second-quarter estimates are up 1 cent in the last 7 days to 35 cents.

Value Fundamentals

Newell Rubbermaid is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 9.01 and a price-to-book ratio of 1.95. The company also has a stellar 5-year average return on equity (ROE) of 23.29%. Additionally, NWL pays a dividend, with a current yield of 1.80%.

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