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Fortune (FBHS) Q3 Earnings & Revenues Miss Estimates, Up Y/Y

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Fortune Brands Home & Security, Inc.  reported weaker-than-expected results for third-quarter 2018. The company stated that Hurricane Florence impacted its North Carolina operations in the quarter. Moreover, a slower summer market dampened the company’s revenues and profitability in the reported quarter.

Earnings/Revenues

Quarterly adjusted earnings came in at 93 cents per share, up 12% year over year. However, the bottom-line figure missed the Zacks Consensus Estimate of $1.05.

Revenues in the reported quarter came in at $1,380.8 million, up 2.4% year over year. However, the top-line figure missed the Zacks Consensus Estimate of $1,438 million.

Segmental Break-Up

Cabinets segment’s sales slipped 2.5% year over year to $599 million in the reported quarter. Plumbing sales grew 5.3% year over year to $461.5 million. Third-quarter revenues of the company’s Doors & Security segment were $320.3 million, up 8.2% year over year.

Margins/Costs

In the Sep-end quarter, Fortune Brands’ cost of sales, before charges/gains, rose 5.2% year over year to $886.9 million. Selling, administrative, and research and development expenses in the quarter flared up 2.4% year over year to $305.1 million. Adjusted operating margin in the quarter was 10.7%, down 410 basis points year over year.

Balance Sheet/Cash Flow

Exiting the third quarter, Fortune Brands’ cash and cash equivalents were $389.9 million, up from $323 million recorded as of Dec 31, 2018. Long-term debt came in at $1,988.4 million up from $1,507.6 million recorded at the end of 2017.

In the first nine months of 2018, the company generated $343.7 million cash from operating activities, down 2.5% year over year. Capital expenditure amounted to $106.5 million versus $95.5 million recorded in the year-ago period. Free cash flow was down 14.3% year over year to $242.6 million.

Outlook

Fortune Brands believes solid demand for home and housing products, as well as increased sales for door and plumbing products will drive its revenues in the quarters ahead. The company is also making efforts to offset the adverse impact of inflation, on the back of pricing actions and operational excellence.

Based on the existing market conditions, this Zacks Rank #3 (Hold) company currently anticipates 2018 earnings of $3.41-$3.49 per share and sales growth of 5-6%.

Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are listed below:

Altra Industrial Motion Corp. sports a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 4.01% in the past four quarters. . You can see the complete list of today’s Zacks #1 Rank stocks here.

Donaldson Company, Inc. (DCI - Free Report) also sports a Zacks Rank of 1. The company delivered an average positive earnings surprise of 2.29% in the preceding four quarters.

Atkore International Group Inc. (ATKR - Free Report) carries a Zacks Rank #2 (Buy). The company generated an average positive earnings surprise of 24.46% in the trailing four quarters.

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