Newell Rubbermaid Inc. (NWL), the maker of Sharpie pens, Calphalon cookware and Rubbermaid containers, reported fourth quarter and full-year 2009 recurring earnings of $0.27 and $1.31 per share respectively, compared to recurring earnings of $0.11 and $1.21 in the same period in 2008. The recurring quarterly earnings were in line with the Zacks Consensus Estimate while the fiscal recurring earnings marginally missed the Zacks Consensus Estimate by a penny.

There were no estimate revisions in either direction over the last 7 days for both the quarterly and fiscal estimates. Over the last 30 days, one out of the 14 analysts covering the stock lowered estimates for full year 2010. Currently, the Zacks Consensus Estimate for 2010 is $1.46 per share, up 11.16% year-over-year.

With respect to earnings surprises, the stock has fluctuated substantially over the last four quarters in the range of approximately 9%-150%, with the average at 58%. This implies that Newell has beaten the Zacks Consensus Estimate by 58% on an average in the last four quarters. However, our long-term recommendation for Newell is Neutral as we anticipate it to perform in line with the broader market.

Despite the challenging macroeconomic environment, Newell grew market share in most of its businesses in 2009, significantly improved both its gross and operating margins, and lowered working capital to generate increased operating cash flow. With the stabilization of sales in most of the markets and improved margin performance, Newell ramped up its strategic spending in the fourth quarter to drive growth in 2010.

During the quarter, net sales declined 2% to $1.42 billion, primarily due to product line exits partially offset by the positive impact of foreign currency translation. Net sales for full year 2009 decreased 14% to $5.58 billion largely due to the exit of certain product lines and the negative impact of foreign currency translation, partially offset by accretive acquisitions.

Gross margin for the quarter was 37.0%, up 700 basis points from the year-earlier quarter reflecting productivity gains and improved pricing and lower input costs, which more than offset the decline in sales. For full year 2009, gross margin increased 36.7%, up 390 basis points compared to 2008.

During the quarter, Newell generated an operating cash flow of $187.1 million, driven by increased earnings and improved working capital management. For full year 2009, the company generated an operating cash flow of $602.8 million compared to $454.9 million in 2008. At year-end 2009, Newell had cash and cash equivalents of $278.3 million and total long-term debt of over $2.0 billion.

Management expects fiscal year 2010 core sales to increase in the low single digits, with gross margin anticipated to increase 75 to 100 basis points. Recurring earnings for the full fiscal year are expected in the range of $1.35 to $1.45 per share, while operating cash flow is projected to be approximately $500 million.

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