JPMorgan says buy Newell stock to hedge against tariffs

JPMorgan upgraded Newell Brands (NWL) to "overweight" with a price target of $7, citing its tariff-advantaged manufacturing footprint with 15 US plants and two in Mexico, insulating it from potential trade headwinds. Analyst Andrea Teixeira also expects Newell to benefit from its ongoing turnaround, including a more focused portfolio strategy and improved logistics, as well as its potential to gain market share from competitors facing higher import costs. The company's 5.34% dividend yield further enhances its appeal.

Analysis

JPMorgan has upgraded Newell Brands (NWL) to "overweight" with a $7 price target, indicating a potential 33% upside from current levels, primarily driven by the company's perceived insulation from tariff-related headwinds. This strategic advantage stems from Newell's substantial U.S. manufacturing presence, comprising 15 plants, and two additional facilities in Mexico compliant with MCA standards, positioning it favorably against competitors with greater reliance on overseas sourcing. Analyst Andrea Teixeira noted that Newell's relatively low exposure to China, mostly concentrated in baby gear products which were previously exempt under Section 301 tariffs, further bolsters its resilience against potential new trade measures. The upgrade also reflects increasing confidence in Newell's internal turnaround, characterized by a more focused portfolio strategy, enhanced logistics, and accelerated innovation cycles, with senior management signaling the company is "finally on the right track." Recent first-quarter financial results, which surpassed Street estimates, alongside ongoing distribution gains, product innovation, efforts to deleverage the balance sheet, and improve profit margins, support this optimistic outlook. Consequently, JPMorgan views Newell not merely as a defensive play against tariffs but as a company poised to gain market share if competitors face increased import costs, especially considering NWL shares have declined over 50% year-to-date and currently offer a 5.34% dividend yield, suggesting a favorable risk-reward profile.

Key Decisions for Investors

• Investors could consider Newell Brands as a potential investment, given its upgraded 'overweight' rating, a 33% upside to the $7 price target, and its significant U.S. manufacturing footprint offering a hedge against tariff uncertainties.
• The progression of Newell's turnaround strategy, specifically improvements in operational efficiency, balance sheet deleveraging, and market share gains against import-reliant competitors, should be closely monitored to validate the bullish thesis, especially with the stock trading at distressed levels.
• The attractive 5.34% dividend yield presents a notable income component that could enhance total returns while the company executes its turnaround and capitalizes on its tariff-advantaged position.
• Given escalating trade tensions, exposure to Newell Brands may offer a strategic advantage for portfolios seeking companies with strong domestic production capabilities that could benefit from shifting geopolitical dynamics and potential cost pressures on competitors.