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Fortune Brands Home & Security, Inc. reported second-quarter 2022 earnings before charges/gains of $1.67 per share, which surpassed the Zacks Consensus Estimate of $1.58 by 5.7%. On a year-over-year basis, the bottom line increased 7.1%. Following this stellar performance, shares of FBHS gained 1.6% in after-hours trading on July 27.
In the second quarter, Fortune Brands’ net sales were $2,111 million, increasing 9% from the year-ago quarter’s figure. The improvement was driven by solid performances across most of its segments. Also, the top line beat the consensus estimate of $2,035 million by 3.7%.
Segmental Details
Cabinets’ quarterly net sales grew 21% year over year to $855.6 million. Results were driven by growth in price and volume.
Water innovations net sales decreased 6% year over year to $650 million. This downside was induced by coronavirus-related shutdowns in China.
Outdoors & Security’s net sales increased 13% to $605.4 million on the back of favourable price across all product categories.
FBHS also announced that the process of its splitting into two publicly-traded companies is progressing ahead of schedule. Fortune Brands intends to file the initial form 10 during the third quarter of 2022.
Fortune Brands Home & Security, Inc. Price and Consensus
In the second quarter, Fortune Brands’ cost of sales increased 10% year over year to $1,347.9 million. The metric represented 63.9% of net sales compared with 63.5% in the year-ago quarter. Selling, general and administrative expenses increased 10% to $434.6 million, accounting for 20.6% of the net sales compared with 20.4% a year ago.
Operating income before charges/gains increased 7% to $319.8 million. Operating margin before charges/gains was 15.1%, down 30 basis points year over year. Interest expenses increased 44% to $30.5 million.
Balance Sheet
While exiting the second quarter of 2022, Fortune Brands’ cash and cash equivalents were $360.6 million, down 13.6% from $471.5 million at the end of the fourth quarter of 2021. Its long-term debt increased 45.4% to $3,357.9 million from $2,309.8 million recorded at the end of the fourth quarter of 2021.
In the first six months of 2022, net cash generated from operating activities was $41.9 million compared with $262.7 million generated in the year-ago period. Capital expenditure amounted to $115.6 million, up from $65.8 million in the year-ago period. Its free cash outflow was $65.3 million against $230.7 million free cash inflow in the year-ago period.
In the first six months of 2022, Fortune Brands rewarded its shareholders with a dividend payout of $73.6 million, up 2.2% year over year. The amount spent on purchasing treasury stock totaled $505 million, up 223.7%.
Outlook
Fortune Brands anticipates benefiting from strength in its housing end market in the quarters ahead.
For 2022, FBHS expects sales to increase 6.5-7.5% from the previous year’s level on the back of its expectation of U.S. home products’ market growth of 4-6% and global home products’ market growth of 3-5%. Earnings before charges/gains are adjusted to $6.36-$6.50 per share from the earlier issued projection of $6.40-$6.60 due to incremental costs related to the separation.
For 2022, cash flow from operations is anticipated to be $881-$951 million compared with $973-$1,108 million projected earlier, while capital expenditures are likely to be $300-$330 million compared with $375-$425 million projected earlier.
Management anticipates a free cash flow generation of $590-$630 million compared with the previous projection of $615-$700 million.
Zacks Rank and Stocks to Consider
FBHS currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the retail-wholesale sectors are discussed below.
In the past 60 days, DTLR’s earnings estimates have increased 0.1% for fiscal 2022 (ending Jan 2023). The stock has grown 22.8% in the past six months.
Dollar General Corporation (DG - Free Report) has a Zacks Rank #2 (Buy), currently. DG delivered a trailing four-quarter earnings surprise of 2.9%, on average.
Earnings estimates for DG’s fiscal 2022 (ending Jan 2023) have increased 0.2% in the past 60 days. The stock has gained 17.3% in the past six months.
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Fortune Brands (FBHS) Q2 Earnings & Revenues Beat Estimates
Fortune Brands Home & Security, Inc. reported second-quarter 2022 earnings before charges/gains of $1.67 per share, which surpassed the Zacks Consensus Estimate of $1.58 by 5.7%. On a year-over-year basis, the bottom line increased 7.1%. Following this stellar performance, shares of FBHS gained 1.6% in after-hours trading on July 27.
In the second quarter, Fortune Brands’ net sales were $2,111 million, increasing 9% from the year-ago quarter’s figure. The improvement was driven by solid performances across most of its segments. Also, the top line beat the consensus estimate of $2,035 million by 3.7%.
Segmental Details
Cabinets’ quarterly net sales grew 21% year over year to $855.6 million. Results were driven by growth in price and volume.
Water innovations net sales decreased 6% year over year to $650 million. This downside was induced by coronavirus-related shutdowns in China.
Outdoors & Security’s net sales increased 13% to $605.4 million on the back of favourable price across all product categories.
FBHS also announced that the process of its splitting into two publicly-traded companies is progressing ahead of schedule. Fortune Brands intends to file the initial form 10 during the third quarter of 2022.
Fortune Brands Home & Security, Inc. Price and Consensus
Fortune Brands Home & Security, Inc. price-consensus-chart | Fortune Brands Home & Security, Inc. Quote
Costs & Expenses
In the second quarter, Fortune Brands’ cost of sales increased 10% year over year to $1,347.9 million. The metric represented 63.9% of net sales compared with 63.5% in the year-ago quarter. Selling, general and administrative expenses increased 10% to $434.6 million, accounting for 20.6% of the net sales compared with 20.4% a year ago.
Operating income before charges/gains increased 7% to $319.8 million. Operating margin before charges/gains was 15.1%, down 30 basis points year over year. Interest expenses increased 44% to $30.5 million.
Balance Sheet
While exiting the second quarter of 2022, Fortune Brands’ cash and cash equivalents were $360.6 million, down 13.6% from $471.5 million at the end of the fourth quarter of 2021. Its long-term debt increased 45.4% to $3,357.9 million from $2,309.8 million recorded at the end of the fourth quarter of 2021.
In the first six months of 2022, net cash generated from operating activities was $41.9 million compared with $262.7 million generated in the year-ago period. Capital expenditure amounted to $115.6 million, up from $65.8 million in the year-ago period. Its free cash outflow was $65.3 million against $230.7 million free cash inflow in the year-ago period.
In the first six months of 2022, Fortune Brands rewarded its shareholders with a dividend payout of $73.6 million, up 2.2% year over year. The amount spent on purchasing treasury stock totaled $505 million, up 223.7%.
Outlook
Fortune Brands anticipates benefiting from strength in its housing end market in the quarters ahead.
For 2022, FBHS expects sales to increase 6.5-7.5% from the previous year’s level on the back of its expectation of U.S. home products’ market growth of 4-6% and global home products’ market growth of 3-5%. Earnings before charges/gains are adjusted to $6.36-$6.50 per share from the earlier issued projection of $6.40-$6.60 due to incremental costs related to the separation.
For 2022, cash flow from operations is anticipated to be $881-$951 million compared with $973-$1,108 million projected earlier, while capital expenditures are likely to be $300-$330 million compared with $375-$425 million projected earlier.
Management anticipates a free cash flow generation of $590-$630 million compared with the previous projection of $615-$700 million.
Zacks Rank and Stocks to Consider
FBHS currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the retail-wholesale sectors are discussed below.
Dollar Tree, Inc. (DLTR - Free Report) sports a Zacks Rank #1 (Strong Buy), currently. DTLR’s earnings surprise in the last four quarters was 13.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, DTLR’s earnings estimates have increased 0.1% for fiscal 2022 (ending Jan 2023). The stock has grown 22.8% in the past six months.
Dollar General Corporation (DG - Free Report) has a Zacks Rank #2 (Buy), currently. DG delivered a trailing four-quarter earnings surprise of 2.9%, on average.
Earnings estimates for DG’s fiscal 2022 (ending Jan 2023) have increased 0.2% in the past 60 days. The stock has gained 17.3% in the past six months.