Fortune Brands Home & Security, Inc. reported third-quarter 2020 earnings before charges/gains of $1.19 per share, surpassing the Zacks Consensus Estimate of $1.06 by 12.3%. On a year-over-year basis, the bottom line increased 25.3% due to sales growth.
Fortune Brands’ net sales were $1,652.1 million, increasing 13% from the year-ago figure. The improvement was driven by solid performance across all of its segments. The top line beat the consensus estimate of $1,528 million by 8.1%.
Segmental Details
Cabinets’ net sales grew 11% year over year to $654.8 million. Results were driven by continued solid demand for value products.
Plumbing net sales increased 15% year over year to $590.6 million. Results were driven by impressive sales performance in the United States and China.
Doors & Security’s net sales increased 14% to $406.7 million, on the back of higher sales of doors, decking and security products.
Costs & Expenses
In the third quarter, Fortune Brands’ cost of sales increased 15% year over year to $1,071.5 million. It represented 64.9% of net sales compared with 64.1% in the year-ago quarter. Selling, general and administrative expenses increased 5% to $328.3 million, and represented 19.9% of the net sales compared with 21.3% a year ago.
Operating income before charges/gains increased 20% to $244.2 million. Operating margin before charges/gains climbed 90 basis points to 14.8%. Interest expenses decreased 15% to $20.1 million.
Balance Sheet
Exiting the third quarter, Fortune Brands’ cash and cash equivalents were $464.5 million, up 19.7% from $387.9 million at the end of 2019. Its long-term debt declined 7.1% to $2,086.5 million sequentially.
In the first nine months of 2020, net cash generated by operating activities was $506.8 million compared with $353.8 million in the year-ago period. Capital expenditure amounted to $66.2 million, down from $82.4 million.
Outlook
For 2020, Fortune Brands anticipates net sales to increase 4-5% over the previous year. Earnings before charges/gains are estimated to be $4.03-$4.11 per share. Also, it anticipates to generate free cash flow of $590-$620 million.
Zacks Rank & Other Stocks to Consider
The company currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks are Kaman Corporation , Dover Corporation (DOV - Free Report) and IDEX Corporation (IEX - Free Report) . All these companies carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kaman delivered a positive earnings surprise of 30.42%, on average, in the trailing four quarters.
Dover delivered a positive earnings surprise of 18.10%, on average, in the trailing four quarters.
IDEX delivered a positive earnings surprise of 6.80%, on average, in the trailing four quarters.
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Fortune Brands Home & Security, Inc. reported third-quarter 2020 earnings before charges/gains of $1.19 per share, surpassing the Zacks Consensus Estimate of $1.06 by 12.3%. On a year-over-year basis, the bottom line increased 25.3% due to sales growth.
Fortune Brands’ net sales were $1,652.1 million, increasing 13% from the year-ago figure. The improvement was driven by solid performance across all of its segments. The top line beat the consensus estimate of $1,528 million by 8.1%.
Segmental Details
Cabinets’ net sales grew 11% year over year to $654.8 million. Results were driven by continued solid demand for value products.
Plumbing net sales increased 15% year over year to $590.6 million. Results were driven by impressive sales performance in the United States and China.
Doors & Security’s net sales increased 14% to $406.7 million, on the back of higher sales of doors, decking and security products.
Costs & Expenses
In the third quarter, Fortune Brands’ cost of sales increased 15% year over year to $1,071.5 million. It represented 64.9% of net sales compared with 64.1% in the year-ago quarter. Selling, general and administrative expenses increased 5% to $328.3 million, and represented 19.9% of the net sales compared with 21.3% a year ago.
Operating income before charges/gains increased 20% to $244.2 million. Operating margin before charges/gains climbed 90 basis points to 14.8%. Interest expenses decreased 15% to $20.1 million.
Balance Sheet
Exiting the third quarter, Fortune Brands’ cash and cash equivalents were $464.5 million, up 19.7% from $387.9 million at the end of 2019. Its long-term debt declined 7.1% to $2,086.5 million sequentially.
In the first nine months of 2020, net cash generated by operating activities was $506.8 million compared with $353.8 million in the year-ago period. Capital expenditure amounted to $66.2 million, down from $82.4 million.
Outlook
For 2020, Fortune Brands anticipates net sales to increase 4-5% over the previous year. Earnings before charges/gains are estimated to be $4.03-$4.11 per share. Also, it anticipates to generate free cash flow of $590-$620 million.
Zacks Rank & Other Stocks to Consider
The company currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks are Kaman Corporation , Dover Corporation (DOV - Free Report) and IDEX Corporation (IEX - Free Report) . All these companies carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kaman delivered a positive earnings surprise of 30.42%, on average, in the trailing four quarters.
Dover delivered a positive earnings surprise of 18.10%, on average, in the trailing four quarters.
IDEX delivered a positive earnings surprise of 6.80%, on average, in the trailing four quarters.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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