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Fortune Brands Home & Security, Inc. has been benefiting from solid momentum in its water innovations business, supported by a healthy demand environment and incremental investments in brands and customer service. The growing popularity of the company’s doors and decking products, coupled with strength in its security business, is likely to drive its top line in the quarters ahead. Solid demand for the company’s cabinetry products and robust backlog level are also likely to be beneficial. For 2022, it anticipates a sales increase in the range of 5.5-7.5% year over year.
The company focuses on strengthening its businesses through the acquisition of assets. Its acquisition of LARSON Manufacturing (December 2020) enhanced its offering for outdoor living and strengthened its foothold in the doors and decking space. Also, strength in the Fiberon business (September 2018) has been complementing its existing door brand, Therma-Tru. FBHS expects sales from its Fiberon business to grow 20% for 2022 on a year-over-year basis.
It remains committed toward rewarding shareholders through dividend payouts and share buybacks. In the first three months of 2022, the company repurchased shares of $377.1 million and paid out dividends worth $37.2 million. Also, in March 2022, it authorized the repurchase of up to an additional $750 million of its shares over the next two years (set to expire on Mar 1, 2024). Further, it hiked its quarterly dividend rate by 7.7% in December 2021.
However, Fortune Brands’ high-debt profile poses a major concern. Exiting first-quarter 2022, its long-term debt was $3,367.9 million, reflecting an increase of 45.8% sequentially. Any further increase in debt levels can raise its financial obligations and hurt profitability.
It has also been experiencing escalating costs and expenses over time. In first-quarter 2022, FBHS’ cost of sales and its selling, general and administrative expenses both jumped 10%, on a year-over-year basis. Also, supply chain constraints, raw-material inflation, and a labor shortage remain persistent concerns.
Image Source: Zacks Investment Research
In the past month, this Zacks Rank #3 (Hold) stock has lost 9% compared with the industry’s decline of 14.7%.
Key Picks
Some better-ranked stocks from the Zacks Retail-Wholesale sector are discussed below.
In the past 60 days, Lovesac’s earnings estimates have increased 65.4% for fiscal 2023 (ending January 2023). LOVE’s shares have lost 41.1% in the past month.
Beacon Roofing Supply, Inc. (BECN - Free Report) presently flaunts a Zacks Rank #1. Its earnings surprise in the last four quarters was 28.14%, on average.
BECN’s earnings estimates have increased 19.4% for fiscal 2022 (ending September 2022) in the past 60 days. Its shares have lost 0.9% in the past month.
Nordstrom, Inc. (JWN - Free Report) presently carries a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 13.91%, on average.
Nordstrom’s earnings estimates have been stable for fiscal 2023 (ending January 2023) in the past 60 days. JWN’s shares have lost 21.2% in the past month.
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Fortune Brands (FBHS) Exhibits Solid Prospects, Risks Persist
Fortune Brands Home & Security, Inc. has been benefiting from solid momentum in its water innovations business, supported by a healthy demand environment and incremental investments in brands and customer service. The growing popularity of the company’s doors and decking products, coupled with strength in its security business, is likely to drive its top line in the quarters ahead. Solid demand for the company’s cabinetry products and robust backlog level are also likely to be beneficial. For 2022, it anticipates a sales increase in the range of 5.5-7.5% year over year.
The company focuses on strengthening its businesses through the acquisition of assets. Its acquisition of LARSON Manufacturing (December 2020) enhanced its offering for outdoor living and strengthened its foothold in the doors and decking space. Also, strength in the Fiberon business (September 2018) has been complementing its existing door brand, Therma-Tru. FBHS expects sales from its Fiberon business to grow 20% for 2022 on a year-over-year basis.
It remains committed toward rewarding shareholders through dividend payouts and share buybacks. In the first three months of 2022, the company repurchased shares of $377.1 million and paid out dividends worth $37.2 million. Also, in March 2022, it authorized the repurchase of up to an additional $750 million of its shares over the next two years (set to expire on Mar 1, 2024). Further, it hiked its quarterly dividend rate by 7.7% in December 2021.
However, Fortune Brands’ high-debt profile poses a major concern. Exiting first-quarter 2022, its long-term debt was $3,367.9 million, reflecting an increase of 45.8% sequentially. Any further increase in debt levels can raise its financial obligations and hurt profitability.
It has also been experiencing escalating costs and expenses over time. In first-quarter 2022, FBHS’ cost of sales and its selling, general and administrative expenses both jumped 10%, on a year-over-year basis. Also, supply chain constraints, raw-material inflation, and a labor shortage remain persistent concerns.
Image Source: Zacks Investment Research
In the past month, this Zacks Rank #3 (Hold) stock has lost 9% compared with the industry’s decline of 14.7%.
Key Picks
Some better-ranked stocks from the Zacks Retail-Wholesale sector are discussed below.
The Lovesac Company (LOVE - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 231.48%, on average.
In the past 60 days, Lovesac’s earnings estimates have increased 65.4% for fiscal 2023 (ending January 2023). LOVE’s shares have lost 41.1% in the past month.
Beacon Roofing Supply, Inc. (BECN - Free Report) presently flaunts a Zacks Rank #1. Its earnings surprise in the last four quarters was 28.14%, on average.
BECN’s earnings estimates have increased 19.4% for fiscal 2022 (ending September 2022) in the past 60 days. Its shares have lost 0.9% in the past month.
Nordstrom, Inc. (JWN - Free Report) presently carries a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 13.91%, on average.
Nordstrom’s earnings estimates have been stable for fiscal 2023 (ending January 2023) in the past 60 days. JWN’s shares have lost 21.2% in the past month.