Can Newell's Cost-Saving Drive Sustain Its Margin Expansion Momentum?

Core Insights - Newell Brands Inc. (NWL) has shown significant progress in margin recovery despite pressure on top-line sales, with normalized gross margin increasing by 80 basis points year over year to 35.6% and normalized operating margin expanding by 10 basis points to 10.7% in Q2 2025 [1][8] - The company has committed to doubling its evergreen margin-expansion target, now aiming for a 110-basis-point operating margin gain in 2025 compared to 2024 [1] Cost-Saving Strategy - Newell has invested nearly $2 billion in its North American production system since 2017, enhancing automation and creating tariff-advantaged manufacturing capacity [2] - The company expects to fully offset $155 million of gross tariff costs in 2025 through supply chain leverage, tariff-related price adjustments, and ongoing productivity programs [2] - Management is targeting a reduction in overhead as a percentage of sales starting in Q3, following years of reinvestment in brand management and consumer insights [2] Future Projections - Newell projects normalized operating margins of 9% to 9.5% for the full year 2025, with normalized EPS guidance of 66-70 cents [3] - The company anticipates sequential top-line improvement in the second half of the year, supported by distribution gains and innovation launches [3] - Long-term goals include achieving a gross margin range of 37-38% and sustainably expanding operating margins through innovation and automation [3] Stock Performance - Newell's shares have gained 11.8% over the past three months, outperforming both the industry and the broader Consumer Staples sector, which declined by 4.6% and 4.2%, respectively [4] - The stock currently trades at a forward 12-month P/E ratio of 8.87X, significantly lower than the industry average of 19.80X and the sector average of 16.85X, indicating a modest discount relative to peers [9]