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Fortune Brands Rises 28.7% YTD: What's Driving the Rally?

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The price performance of Fortune Brands Home Security, Inc. (FBHS - Free Report) has been impressive since the beginning of this year, which is evident from a 28.7% increase in its share price. Strong product offerings, accretive acquisitions and its investment in core competencies led to positive market sentiments for the company.

The Deerfield, IL-based company, with $11.6 billion of market capitalization, belongs to the Zacks Security and Safety Services industry. The company currently sports a Zacks Rank #1 (Strong Buy).

Year to date, Fortune Brands has outperformed its industry’s gain of 0.4% and the S&P 500’s rally of 3.1%.

 

 

Factors Driving the Stock

Fortune Brands has been benefiting from strength across its plumbing business on the back of a powerful suite of brands, and the success of its category and channel expansion strategies. Also, strong demand for decking products and strength in its doors as well as security businesses, supported by product launches, are likely to continue boosting revenues of its Doors & Security segment. Moreover, the growing popularity of the company’s value price point cabinetry products will likely continue supporting its Cabinets segment.

Also, the company’s acquisition of Fiberon (acquired in September 2018) strengthened its existing door brand — Therma-Tru — and enhanced its growth opportunities in the outdoor living space. Also, Fortune Brands invested in capacity and product line expansion in the security business, and the acquired Fiberon business. Notably, in the second quarter of 2020, its Fiberon decking brand grew in the mid-teens range.

Moreover, Fortune Brands’ initiatives for supply-chain optimization and manufacturing footprint optimization are likely to boost margins and its financial performance in the quarters ahead. Further, the company’s several cost-control measures, including the reduction of operating expenses and non-essential capital expenditure, will continue to help it maintain a healthy margin performance.

In addition, it remains focused on rewarding shareholders through share buybacks and dividend payouts. Notably, in the first half of 2020, the company repurchased shares worth $150 million and also paid out dividends worth $66.6 million. Also, in December 2019, it announced a 9% hike in its quarterly dividend rate.

Other Stocks to Consider

Some other top-ranked stocks from the same space are Johnson Controls International plc (JCI - Free Report) , NortonLifeLock Inc. (NLOK - Free Report) and Ituran Location and Control Ltd. (ITRN - Free Report) . All these companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Johnson Controls delivered an earnings surprise of 13.11%, on average, in the trailing four quarters.

NortonLifeLock delivered an earnings surprise of 59.96%, on average, in the trailing four quarters.

Ituran delivered an earnings surprise of 15.61%, on average, in the trailing four quarters.

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