Carl Icahn Ups Investment in Newell Brands

Carl Icahn (Trades, Portfolio) disclosed on Tuesday that his firm expanded its position in Newell Brands Inc. (NWL, Financial) 15%, according to GuruFocus real-time picks.

Having established a 30,279,791-share stake in the first quarter, Icahn Enterprises LP (IEP, Financial) added 5,011,098 shares for $20.88 per share. CNBC columnist Liz Moyer said on Aug. 6 that Icahn “helped broker a deal” between Newell Brands and hedge fund Starboard Value, leading to the installation of new board directors.

Company reports lower net sales and profit margins during the second quarter

Hoboken, New Jersey-based Newell Brands manufactures a wide variety of consumer goods through several well-known brands, including Paper Mate, Sharpie, Rubbermaid and Jostens. The company reported net sales of $2.2 billion for the second quarter, down $300 million from the prior-year quarter on several factors, including “significant volume declines” in the baby segment related to the liquidation of Toys ‘R’ Us.

Normalized operating margins of 10.9% declined approximately 1.5% from the prior-year quarter. Although the company expects second-half margins between 12% and 12.4%, GuruFocus still warns that Newell Brand’s operating and gross margins have declined over the last five years. Other severe warning signs include increasing long-term debt and higher asset growth rates compared to revenue growth rates.

CEO Michael Polk said one of the company’s critical priorities for the remainder of the year is to “reignite performance on [Newell Brands’] continuing businesses.” Despite this, Polk also listed several challenges to company performance, including increased inflation, worsening foreign exchange rates and the negative impact of tariffs.

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Moyer also said Icahn invested in Newell Brands, “calling it undervalued.” GuruFocus lists three positive investing signs suggesting undervaluation: a price-earnings ratio near a 10-year low, a price-book ratio near a 10-year low and a price-sales ratio near a five-year low.

Richard Pzena (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) established stakes in Newell Brands during the second quarter.

Disclosure: No positions.