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Stock Analyst Update

Newell's Stock May Have Little Upside through 2000

Its price hikes amid slowing demand sour growth prospects.

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What Happened?
Newell Rubbermaid (NWL) warned that its third- and fourth-quarter earnings would fall beneath expectations due to a triple whammy of sluggish demand, higher raw-material prices, and a weak euro. Newell had expected earnings growth in the second half of the year to be in the high teens, but instead it foresees single-digit profit growth. Newell will continue its strategy of raising prices to offset higher raw-material costs even though consumers have balked at higher prices.

What It Means for Investors
We warned investors two months ago of a possible earnings disappointment, and we still think investors should avoid Newell as its growth strategy has hit a wall. Consumer demand for its products in Europe and in the United States is slowing because Newell raised prices in order to offset higher prices for resin--the main raw material for its core plastic-container business. 

Harry Milling does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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