Fortune Brands Home & Security, Inc. reported third-quarter 2021 earnings before charges/gains of $1.49 per share, which surpassed the Zacks Consensus Estimate of $1.42 by 4.93%. On a year-over-year basis, the bottom line increased 25.2% on the back of sales growth.

In the third quarter, Fortune Brands’ net sales were $1,986.3 million, increasing 20.2% from the year-ago figure. The improvement was driven by solid performance across all its segments. Also, the top line beat the consensus estimate of $1,942 million by 2.26%.

Segmental Details

Cabinets’ quarterly net sales grew 9% year over year to $716.5 million. Results were driven by continued strong demand for the company’s products.

Plumbing net sales increased 26% year over year to $741.4 million. Results were driven by impressive performance across the business.

Outdoors & Security’s net sales increased 30% to $528.4 million on the back of solid sales growth for decking, doors, and security products.

Costs & Expenses

In the third quarter, Fortune Brands’ cost of sales increased 19% year over year to $1,280 million. It represented 64.4% of net sales compared with 64.9% in the year-ago quarter. Selling, general and administrative expenses increased 22% to $400.2 million and represented 20.1% of the net sales compared with 19.9% a year ago.

Operating income before charges/gains increased 20% to $293.3 million. Operating margin before charges/gains were 14.8%, unchanged year over year. Interest expenses increased 2% to $20.6 million.

Balance Sheet

Exiting the third quarter, Fortune Brands’ cash and cash equivalents were $460.7 million, up 0.2% from $460 million at the end of the previous quarter. Its long-term debt increased 0.8% to $2,629.1 million sequentially.

In the first nine months of 2021, net cash provided by operating activities was $430.8 million compared with $506.8 million in the year-ago period. Capital expenditure amounted to $113 million, up from $66.2 million. In the first nine months of the year, its free cash flow was $352.1 million, down 29.3%.

In the first nine months of 2021, the company rewarded shareholders with a dividend payout of $107.9 million. The amount represents growth of 8% year over year. Amount spent on purchasing treasury stock totaled $252.9 million, up 68.6%.

Outlook

For 2021, Fortune Brands anticipates sales to increase 24.5-25.5% from the previous year, higher than growth of 23-25% guided earlier. Earnings before charges/gains are estimated to be $5.63-$5.73 per share compared with 5.65-$5.85 per share predicted earlier. Also, it anticipates generating a free cash flow of $625-$675 million.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the same space are RH (RH Quick QuoteRH - Free Report) , Tempur Sealy International, Inc. (TPX Quick QuoteTPX - Free Report) , and Ethan Allen Interiors Inc. (ETD Quick QuoteETD - Free Report) . While RH currently sports a Zacks Rank #1 (Strong Buy), Tempur Sealy and Ethan Allen carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

RH delivered an earnings surprise of 16.44%, on average, in the trailing four quarters.

Tempur Sealy delivered an earnings surprise of 30.22%, on average, in the trailing four quarters.

Ethan Allen delivered an earnings surprise of 0.72%, on average, in the trailing four quarters.