Newell Rubbermaid Inc. (NWL), the maker of Sharpie pens, Calphalon cookware and Rubbermaid containers, reported first quarter 2010 earnings of $58.4 million, compared to $33.7 million in the year-ago period. Excluding special items, adjusted earnings per share came in at 25 cents, which easily surpassed the Zacks Consensus Estimate of 18 cents as well as the year-ago EPS of 20 cents.

The better-than-expected performance was primarily driven by increased demand for Newell’s products amid an improving global economy as well as higher gross and operating margins. Moreover, prudent working capital management by the company also led to increased operating cash flow during the quarter. With the stabilization of sales in most of the markets and improved margin performance, Newell continued strategic spending in the quarter to drive growth in 2010.

During the quarter, net sales logged a growth of 8.5% to $1.3 billion from $1.2 billion in the prior year quarter, primarily due to improved demand and inventory restocking by customers coupled with the positive impact of foreign currency translation. However, overall sales were partially offset by product line exits undertaken by the company in 2009.

Newell’s gross margin for the quarter was 36.1%, up 100 basis points (bps) from the year-earlier quarter mainly driven by productivity gains and favorable product mix. Selling, general, administrative expenses, as a percentage of sales, decreased 100 bps year-over-year to 24.9% due to improved leverage on higher revenues. Accordingly, operating income surged 61.0% year-over-year to $130.1 million, while operating margin expanded by 320 bps to 10.0%.

Newell generated an operating cash flow of $29.4 million in the quarter, primarily driven by higher earnings and improved working capital management. During the quarter, the company deployed $31.5 million towards capital expenditure and $13.9 million towards dividend payments. At the end of the first quarter of 2010, Newell had cash and cash equivalents of $253.0 million and long-term debt of over $2.0 billion.

Moving ahead, bolstered by strong quarterly results, Newell now expects 2010 net sales to expand in a range of low to mid single digits, compared to previous expectation of low single digit growth. Moreover, the company now anticipates 2010 earnings to range between $1.38 and $1.48 per share, compared to earlier prediction of $1.35 to $1.45 per share. The revised guidance is in line with the Zacks Consensus Estimate of $1.43 per share, which edged up a penny over the past month as 2 of 14 covering analysts raised expectations, while 1 moved in the opposite direction.
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