Newell Brands Inc. (NWL) shares are trading lower on Friday after the consumer products company reported mixed third-quarter results. The company raised its full-year sales outlook and expects positive sales growth in the fourth quarter and full-year 2026. However, reducing elevated debt remains a priority while managing inflationary challenges.

Gross Margin Expands Due to Productivity Despite Inflation Headwinds

Third-quarter net sales increased 3.7% year over year to $1.873 billion, exceeding analysts' consensus estimate of $1.856 billion. The sales growth reflects core sales growth of 3.3% and favorable foreign exchange.

Adjusted earnings increased by 17.6% to 20 cents per share, in line with the Street's estimate.

Normalized gross margin improved to 35.2%, driven by higher net sales and gross productivity despite higher-than-expected inflationary pressures.

Normalized operating margin expanded to 9.8% from 8.9% a year earlier, while normalized EBITDA increased to $248 million from $225 million.

The company said the current period included a non-cash impairment charge of $101 million related to an indefinite-lived tradename.

Home & Commercial Segment Leads Growth

Home & Commercial Solutions generated net sales of $1.01 billion, up from $942 million a year earlier. The sales were driven by favorable foreign exchange and a 6.0% growth in core sales across Kitchen, Home Fragrance and Commercial businesses.

The Learning & Development segment's net sales rose to $692 million from $681 million the year before. Core sales increased 2.3%, supported by growth in the Writing business, while the Baby business was roughly flat.

The Outdoor & Recreation segment lagged with net sales of $169 million, down from $183 million a year earlier. Core sales declined 6.4% along with unfavorable foreign exchange.

CEO Chris Peterson said on the company's earnings call sales growth improvement was broad-based across U.S. and international markets, four of its six businesses, and seven of its top 10 brands.

He credited investments in innovation, marketing and brand building for the strong momentum and said the company is on track to launch about 25 Tier 1 and Tier 2 innovations in 2026.

Focus on Reducing Elevated Debt

Year-to-date operating cash outflow declined to $93 million from $103 million last year.

Newell revised its full-year operating cash flow guidance to approximately $150 million, primarily because of pension-related accounting treatment and lower anticipated receivables factoring proceeds.

As of Sept. 30, Newell Brands had $4.8 billion in total debt and $249 million in cash and cash equivalents.

During the third quarter, the company entered into a new $800 million asset-based revolving credit facility, replacing the existing secured revolving credit facility and extending the facility's general maturity to 2031.

The company also issued $600 million of 6.250% senior notes due 2031 and used the proceeds to redeem its 6.375% senior notes due 2027 and repay a portion of the borrowings under the new facility.

The company ended the quarter with no short-term debt and is targeting a debt leverage comfortably below 4.5 times by year-end 2026.

Newell anticipates reducing total debt and factoring by $200 million in 2026.

Company Raises 2026 Sales Guidance

CFO Mark Erceg said on the call that stronger sales and productivity gains drove significant margin expansion in the third quarter, with normalized EPS reaching the high end of guidance despite elevated inflation.

The company tightened its full-year 2026 adjusted EPS guidance from the prior range of 73 cents to 77 cents, to the midpoint of 74 cents to 76 cents, compared with the analyst estimate of 76 cents per share.

Newell increased its full-year revenue forecast to between $7.348 billion and $7.420 billion, compared with its prior outlook of $7.276 billion to $7.348 billion. Analysts expect $7.332 billion in estimates.

The company raised its full-year core sales growth to 1% to 2%, up from its prior expectation of flat to 1%. It expects net sales growth of 2% to 3%, compared to the previous range of 1% to 2%.

Expects 2026 normalized operating margin to range from 10.0% to 10.4%.

For the fourth quarter, Newell forecast adjusted per-share earnings of 17 cents to 19 cents, compared with analysts' estimate of 19 cents. It expects revenue of $1.916 billion to $1.954 billion, above the Street's view of $1.934 billion.

Looking to 2027, Newell plans to offset an incremental $150 million of inflation driven by transportation and commodity prices through the company's pricing actions and fuel productivity efforts.

Management remains confident for the upcoming holiday season, expecting consumer demand to be stable with potential for modest growth.

NWL Price Action: Newell Brands shares were down 1.08% at $5.05 on Friday, according to market data.