Griffon Corporation ( GFF Quick Quote GFF - Free Report) seems to be an attractive option for investors seeking exposure in the conglomerates space. Solid growth opportunities, backed by macro trends, along with sound financial performance in the last quarter, add to the stock’s attractiveness. The diversified holding company is based in New York and has a market capitalization of $1.5 billion. It presently has a Zacks Rank #2 (Buy). The company belongs to the Zacks Diversified Operations industry. The industry is among the top 19% (with the rank of 47) of more than 250 Zacks industries. Year to date, the company’s shares have gained 30.3% compared with the industry’s growth of 12.9%. The S&P 500 expanded 14.1% in the same period. Image Source: Zacks Investment Research
Below we discuss why Griffon is a worthy investment option.
Earnings Performance and Macro Tailwinds: The company reported impressive second-quarter fiscal 2021 (ended March 2021) results. Its earnings exceeded the Zacks Consensus Estimate by 50.00% and sales surprise was 2.09%. On a year-over-year basis, its earnings expanded 109%, owing to sales and margin growth. In the quarters ahead, macro trends like focus on manufacturing domestically, home improvement, outdoor living and increased time spent at home might prove advantageous for Griffon. To leverage benefits, the company offers quality products at reasonable prices, has good management team, sound manufacturing capacity in the United States, and a well-diversified business structure. The company is growing well in building and household products markets. Diversified Structure: Griffon has exposure in multiple end markets and regions. Such diversification helps it offset weakness in one or multiple markets with strength in others. Its Consumer and Professional Products segment derives 99% of its revenues from operations in the United States, Canada, Europe and Australia. The segment’s operating company The AMES Companies, Inc. provides products — including professional and consumer tools, home storage related products and others — to customers in residential repaid and remodel, residential new construction, retail, industrial and others markets. Griffon’s Home and Building Products segment operates through the Clopay Corporation. Majority of the segment’s operations are conducted in the United States while businesses are there in Canada as well. Its products — including rolling steel doors and garage doors — are used in residential repaid and remodel, residential new construction and commercial new construction markets. The company’s Defense Electronics segment operates through Telephonics. It provides products like radar systems, communications and surveillance systems and others to the U.S. Government as well as to customers in commercial and international markets. Inorganic Actions: Griffon has been benefiting from synergistic gains from acquired assets as well as disposal of unwanted businesses. In the first six months of fiscal 2021, the company used $2.2 million for making acquisitions (net of cash acquired). It is worth mentioning here that Griffon acquired Quatro Design Pty Ltd through its subsidiary, AMES Companies. This buyout has been strengthening AMES’ footprint in Australia by expanding its sales channel and product offerings. AMES comprises Griffon’s Consumer and Professional Products segment. In financial terms, Griffon anticipates the buyout of Quatro Design to boost its annual revenues by $5 million as well as prove accretive to earnings in fiscal 2021 (ending September 2021). In January 2021, Griffon also divested System Engineering Group, Inc., for an undisclosed amount, to QuantiTech LLC. Shareholders’ Rewards: Griffon has been rewarding shareholders through dividend payouts and share buybacks. In first-half fiscal 2021 (ended March 2021), the company distributed dividends of $8.7 million to its shareholders, reflecting an increase of 18.1% a year ago. In addition, the company repurchased shares worth $2.9 million in the first half compared with $7.5 million worth of shares bought in the year-ago period. A healthy cash flow position will likely help it reward its shareholders. Earnings Estimate Revisions: The company’s earnings estimates have increased in the past 60 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.91 for fiscal 2021 and $2.15 for fiscal 2022 (ending September 2022), suggesting increases of 4.4% and 8% from the 60-day-ago figures, respectively.