Newell Rubbermaid Inc. (NWL), the maker of Sharpie pens and Rubbermaid containers, logged a strong 10.5% growth in third quarter 2010 earnings, climbing to 42 cents a share from 38 cents in the year-ago quarter.

Earnings also outpaced the Zacks Consensus Estimate of 41 cents. Including special items, earnings per share came in at 9 cents. The strong quarterly performance was mainly attributable to increased core sales, improved productivity and better working capital management.

During the quarter, Newell recorded a modest jump of 2.6% year over year in net sales to $1,487.3 million, marginally behind the Zacks Consensus Estimate of $1,494.0 million. Core sales of the company improved 5.7% for the quarter that primarily benefited from improved market share, distribution wins and strong demand from the Latin American and EMEA (Europe, the Middle East and Africa) markets.

Newell’s quarterly gross profit rose 4.5% year over year to $567.1 million and gross margin expanded 70 bps to 38.1% mainly driven by productivity gains and favorable product mix that fully offset the negative impact from input cost inflation.

Operating income increased 2.8% year over year to $197.6 million, while operating margin was flat compared with the prior-year quarter, as higher sales, improved gross margin and lower restructuring expenses were countered by higher selling, general and administrative expenses.

Newell ended the quarter with cash and cash equivalents of $153.5 million and a long-term debt-to-capitalization ratio of 52.8%, compared with a cash balance of $313.0 million and long-term debt-to-capitalization of 52.5% in the year-ago quarter. Year to date, the company generated an operating cash flow of $377.9 million, primarily driven by higher earnings and improved working capital management.

Newell expects its top line in fiscal 2010 to increase in the range of low-to-mid single digit and core sales to augment in the mid single-digit range. The company maintained its 2010 adjusted earnings in a range of $1.40 to $1.50 per share. The high-end of the guidance is in consonance with the Zacks Consensus Estimate of $1.50 per share, which has remained static over the past 2 months.

Newell Rubbermaid currently has a short-term Zacks #2 Rank (Buy) rating and a long-term Neutral recommendation.

 
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