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Fortune Brands (FBHS) to Post Q2 Earnings: What's in the Cards?

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Fortune Brands Home & Security, Inc. is scheduled to report second-quarter 2021 results on Jul 28, after market close.

The company delivered better-than-expected results in each of the trailing four quarters. Earnings surprise in the last four quarters was 27.53%, on average.  In the last reported quarter, it posted earnings of $1.36 per share, which beat the Zacks Consensus Estimate of $1.04 by 30.77%.

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In the past six months, the company has gained 16.4% compared with the industry’s growth of 27.5%.

Factors at Play

Solid momentum in Fortune Brands’ plumbing business, driven by strong brands and the success of its category and channel expansion strategies, is expected to have boosted its Plumbing segment’s revenues. Growing popularity of the company’s value price point cabinetry products is likely to have supported the Cabinets segment’s top line. Strength in its security business, along with strong demand for doors and decking products, is likely to have augmented revenues of the Outdoors & Security segment.

The company’s LARSON Manufacturing buyout (December 2020) is anticipated to have augmented its second-quarter revenues, given its strong position in the doors and decking space and solid offering for outdoor living. Fortune Brands’ Fiberon business, which has been complementing its existing door brand — Therma-Tru — and strengthening its prospects in the outdoor living space, is anticipated to have augmented its second-quarter performance.

The company’s focus on supply-chain optimization, operational efficiency and other initiatives are likely to have helped it improve margins and profitability in the second quarter.

However, the company has been dealing with escalating cost of sales over the past few quarters, despite its cost-control measures. In the first quarter, its cost of sales and selling, general and administrative expenses jumped 6% and 2%, respectively, on a year-over-year basis. This might have weighed on its margins and profitability in the to-be reported quarter as well.

The Zacks Consensus Estimate for the Plumbing segment's revenues is pegged at $601 million, suggesting growth of 19% from the year-ago reported number but 3.4% decline sequentially. The consensus estimate for Cabinets segment’s revenues stands at $672 million, implying year-over-year growth of 24.7% but a sequential fall of 2.3%. The consensus mark for Outdoors & Security segment’s revenues stands at $578 million, implying a 74.1% and 25.1% increase on a year-over-year and sequential basis, respectively.

The consensus estimate for the company’s second-quarter total revenues is currently pegged at $1,885 million, suggesting increase of 37% and 6.4% year over year and sequentially, respectively. The consensus estimate for earnings of $1.37 suggests an improvement of 45.7% and 0.7% year over year and sequentially, respectively.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Fortune Brands has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at $1.37.

Zacks Rank: The company carries a Zacks Rank #3.

Key Picks

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

A. O. Smith Corporation (AOS - Free Report) has an Earnings ESP of +3.53% and it currently carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax Corporation has an Earnings ESP of +1.50% and a Zacks Rank #2.

Eaton Corporation plc (ETN - Free Report) has an Earnings ESP of +2.17% and Zacks Rank #2.


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