Jefferies has initiated coverage on Newell Rubbermaid (NYSE:NWL) with a price target of 50 bucks, almost 10 dollars above the stock's current level.
The consumer products firm is predicted to enjoy organic sales growth of 4-5% compared to the 3-4% being enjoyed by its peers, the broker said as it issued a "buy" note on the stock.
According to Jefferies, there is a "clear line of sight" for operating margin enhancement and material scope for earnings estimates on the Street to move up.
Capital deployment should add 3-6% per annum to earnings per share (EPS) growth, according to Kevin Grundy at Jefferies.
Grundy has faith in former Unilever man Mike Polk, who moved into the hot seat four years ago, and his "growth game plan".
"We believe CEO Polk and team will continue to maximize value from what has historically been viewed by investors as a sub-par portfolio of disparate businesses," the broker said.
The company operates in five segments: Writing, Home Solutions, Tools, Commercial Products and Baby & Parenting.
The company has, according to the broker's calculations, US$2.4bn of uncommitted cash to deploy between now and fiscal 2020 (FY20), with borrowing capacity of US$3.1bn on top of that, some of which may be splashed on acquisitions, and some could be spent buying back shares.
"We also expect a sharper focus on working capital, along with the likely dissipation of cash restructuring charges, will improve NWL’s FCF [free cash flow] conversion to 100% in FY16-17 from 85% during FY12-15e," Grundy revealed.