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Bull of the Day: Fortune Brands Home & Security (FBHS)

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Fortune Brands Home & Security (FBHS - Free Report) has been waiting 5 years for the turnaround in the U.S. housing and construction market. It's finally here. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by the double digits in 2013 and 2014.

Fortune Brands Home & Security was created in Oct 2011 when it was spun off from Fortune Brands. You probably know some of its brands. It makes products such as MasterBrand cabinets, Moen faucets, Simonton windows and Therma-True door systems. In the security area, it also sells the Master Lock brand.

Fourth Quarter Results Showed The Turn In Housing

On Jan 31, Fortune Brands Home & Security reported its fourth quarter results and beat the Zacks Consensus by a penny. Sales rose 8% and were led by the two big housing segments Kitchen & Bath Cabinetry and Plumbing.

Kitchen & Bath Cabinetry saw sales rise 12% year over year on overall market improvement. Plumbing jumped 15% on increases in all channels including strong gains in U.S. wholesale from new construction and international markets, especially China.

Advanced Windows & Door Systems saw sales rise just 1% as doors were up 5% but windows fell 2%. Only Security & Storage saw falling sales, declining 4%.

Strong 2013 Outlook Reflects Housing Recovery

Fortune Brands Home & Security expects 6% to 8% growth in 2012 as housing and construction continue to recover. Net sales are projected in the high single digits.

The analysts are bullish about 2013, for good reason. All the housing data is indicating that the housing recovery is picking up momentum. Mortgage rates remain near record lows and low inventory suggests a sellers market in some areas.

5 estimates have risen for 2013 in the last 30 days. Earnings are expected to jump 34% in 2013 and another 29% in 2014.

Not A Value Stock

Shares, however, are pricey. They have been on a huge rally since the spin off in 2011.

Fortune Brands Home & Security is trading with a forward P/E of 28.6, well above the average of the S&P 500 at 13.8. However, the price-to-book ratio is just 2.3 which indicates some value may still remain in the company. A P/B ratio under 3.0 usually indicates value.

For the first time since the Great Recession, Fortune Brands Home & Security finds itself on the "right" side of the housing trade.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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