Newell Brands (NWL) reported a Q1 core sales beat, supporting management's confidence in a return to growth in Q2, RBC Capital Markets said Monday in a report.

Stronger-than-expected category demand showed the company's revised commercial strategy is gaining traction, including a return to positive core sales growth in the learning and development division and solid gains in the baby segment, the report said. The home and commercial unit and the outdoor and recreation segment also beat internal targets, RBC said.

Margins expanded despite tariff and inflation headwinds, aided by pricing and productivity improvement, while six of the top 10 brands posted point-of-sale growth and market-share gains, the report said.

Rising input-cost headwinds tied to the Middle East conflict, including higher resin and diesel prices, may weigh on margins, particularly in Q2, the report said.

RBC maintained a sector perform rating on Newell Brands stock with a price target of $4.

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