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Fortune Brands (FBHS) Q1 Earnings & Revenues Beat Estimates

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Fortune Brands Home & Security, Inc. (FBHS - Free Report) reported first-quarter 2021 earnings before charges/gains of $1.36 per share, which surpassed the Zacks Consensus Estimate of $1.04 by 30.8%. On a year-over-year basis, the bottom line increased 67.9% on the back of sales growth.

In the first quarter, Fortune Brands’ net sales were $1,771 million, increasing 26% from the year-ago figure. The improvement was driven by solid performance across all of its segments. Also, the top line beat the consensus estimate of $1,641 million by 7.9%.

Segmental Details

Quarterly net sales for Cabinets grew 11% year over year to $687.9 million. Results were driven by continued solid demand for the company’s products.

Plumbing net sales increased 33% year over year to $621.6 million. Results were driven by impressive performance across the business.

Outdoors & Security’s net sales increased 47% to $461.5 million on the back of double-digit sales growth for composite decking and doors products.

Costs & Expenses

In the first quarter, Fortune Brands’ cost of sales increased 24% year over year to $1,126.9 million. It represented 63.6% of net sales compared with 64.8% in the year-ago quarter. Selling, general and administrative expenses increased 18% to $371.5 million, and represented 21% of the net sales compared with 22.4% a year ago.

Operating income before charges/gains increased 54% to $261.8 million. Operating margin before charges/gains climbed 270 basis points to 14.8%. Interest expenses decreased 3% to $21.4 million.

Balance Sheet

Exiting the first quarter, Fortune Brands’ cash and cash equivalents were $356.1 million, down 15% from $419.1 million at the end of 2020. Its long-term debt increased 4.3% to $2,682.8 million sequentially.

In first three months of 2021, net cash used in operating activities was $69.2 million compared with $13.8 million used in the year-ago period. Capital expenditure amounted to $25.4 million, down from $26.9 million.

Outlook

For 2021, Fortune Brands anticipates sales to increase 20-22% from the previous year. Earnings before charges/gains are estimated to be $5.45-$5.65 per share. Also, it anticipates to generate free cash flow of $650-$700 million.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Alcoa Corporation (AA - Free Report) , Lakeland Industries, Inc. (LAKE - Free Report)   and Energy Recovery, Inc. (ERII - Free Report) . While Alcoa currently sports a Zacks Rank #1 (Strong Buy), Lakeland Industries and Energy Recovery carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alcoa delivered a earnings surprise of 56.78%, on average, in the trailing four quarters.

Lakeland Industries delivered a earnings surprise of 230.73%, on average, in the trailing four quarters.

Energy Recovery delivered a earnings surprise of 232.08%, on average, in the trailing four quarters.

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