Can You Seal Up Profits With This Stock?

By Chad Henage - June 22, 2012 | Tickers: AVP, NWL, TUP | 0 Comments

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When most people think of Tupperware Brands Corp. (NYSE: TUP), the first thought that naturally comes to mind is the thousands of ways that people use different Tupperware containers. Whether it's storing left over food, clothes, or other items, there are few people who aren't familiar with Tupperware. What many people don't realize is, Tupperware also has a beauty sales business that is comparable in type to Avon Products (NYSE: AVP). The company is trying to not only diversify its income stream, but also this gives Tupperware another product line to take overseas. I've owned Tupperware in the past, but I sort of lost track of the story. Since the company reported earnings recently, this gives me a chance to catch up on what's going on with this innovative company. 

Before we get into the company's earnings, first let's take a look at how Tupperware compares to two other companies that are direct competitors. I've already mentioned Avon Products, and the traditional Tupperware brand's main competitor is Newell Rubbermaid (NYSE: NWL). To give you an idea of how the three companies compare, let's look at each on a few different metrics:

You can see that the market isn't exactly impressed with any of the three companies growth prospects. On the surface it looks like Tupperware has the best mix of growth, reasonable valuation, and yield. In addition, Tupperware generates the most free cash flow per $1 of assets. These results look good, but what about the company's most recent earnings?

Tupperware's earnings look pretty good on the surface. Adjusted sales growth came in at 8%, and adjusted EPS increased 23%, which was above expectations. In addition, in the first quarter the company repurchased 1.5% of their outstanding shares. When it comes to the company's different divisions, you can see where they expect to get future growth from. 

Clearly the two big growth drivers are Asia-Pacific and Beauty South America. If these results drove 8% higher adjusted sales and a beat on EPS, what is the company expecting for the full year?

Tupperware expects U.S. and Europe sales to be flat to up slightly. The company also expects sales in Asia-Pacific to be up in the low double-digit to low-teen range. Finally, the company expects beauty sales to be down 3-5% in North America and up 30% in South America. Drawing from this guidance, I wonder if analysts aren't a little too skeptical of Tupperware's revenue growth for the full year. The average analyst expects revenues up just 1.9% this year. However, each part of the company's guidance is better than the company produced in this most recent quarter. First quarter results produced 8% adjusted revenue growth, so it makes sense that better performance would result in revenue growth that's higher. In addition, the company just beat EPS estimate for the first quarter by $0.07, so why have full year EPS estimates come down by $0.02 in the last three months? It appears that Tupperware could surprise analysts on EPS as well. So what should investors expect going forward?

Tupperware has a huge opportunity ahead of it. The company generated 59% of sales in emerging markets in the most recent quarter, and in local currencies sales were up an adjusted 14%. Tupperware's main market is middle class citizens in its markets. To get an idea of how huge the Asia-Pacific opportunity is, consider that by 2020 the middle class in Asia is expected to more than triple from 500 million to over 1.7 billion. In plain english, one of Tupperware's main growth markets is due to grow in size significantly in the next eight years. The fact that investors can buy Tupperware at about 10 times forward earnings, and get a yield over 2.7%, seems like a steal. Check into the company for yourself and see if you should consider sealing up profits with some Tupperware.

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