We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Key Reasons to Hold on to Fortune Brands (FBHS) Stock for Now
Read MoreHide Full Article
Fortune Brands Home & Security stands to benefit from its pricing actions and cost-control measures despite supply-chain constraints and raw material cost inflation. The company’s commitment to reward its shareholders through dividends and share buybacks raises optimism in the stock.
Despite short-term softness in the U.S. housing market due to inflation and rising interest rates, Fortune Brands expects to benefit from strong fundamentals over the long term. Strong sales in the core U.S. market and strength across brands and innovation bode well for the company. Higher decking sales and volume growth at its door brand, Therma-Tru, are boosting revenues at the Outdoors and Security segment. Higher commercial sales are driving revenues from Security. For 2022, the company expects Outdoors and Security net sales to increase 10-12% from the year-ago level.
Transformational efforts and volume growth are supporting growth of the Cabinets segment. For 2022, Fortune Brands expects net sales to increase 10-12% year over year. Strong order volumes and elevated backlog levels should continue to act as catalysts behind the company’s growth. 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%.
Fortune Brands Home & Security, Inc. Price and Consensus
Pricing actions and cost-control measures are helping Fortune Brands offset inflationary pressure, thus leading to the improved top-line (up 9% year over year in the second quarter) and margin performance. For instance, Outdoors and Security operating margin improved 70 basis points in the second quarter from the prior-year quarter, despite supply-chain constraints and cost inflation. For 2022, the company expects adjusted earnings of $6.36-$6.50 per share, suggesting an increase from $5.73 reported in the previous year. The company continues to invest in core competencies, including brand-building, product innovation, digital initiatives, category management and capacity and distribution expansion. These investments are expected to drive long-term growth.
Fortune Brands’ efforts to consistently reward its shareholders through dividends and share buybacks are encouraging. In the first six months of 2022, FBHS rewarded its shareholders with a dividend payout of $73.6 million, up 2.2% year over year. In the same period, the company bought back shares worth approximately $505 million, up more than 200% year over year. In March 2022, the company authorized the repurchase of up to $750 million worth of shares (set to expire on Mar 1, 2024). This was in addition to $400 million buyback authorized in July 2021 (set to expire on Jul 23, 2023). In December 2021, the company hiked its dividend by 7%.
In July 2022, Fortune Brands acquired Aqualisa Holdings, a manufacturer of smart and digital shower products. The acquisition strengthens the company’s Water Innovations business by enabling it to leverage growth accelerants in water management, connected products and global sustainability. By complementing its portfolio of smart water management offerings, the Aqualisa acquisition should help Fortune Brands expand sales in the United States, U.K. and Europe, as well as enter new markets over time.
In light of the above-mentioned positives, we believe investors should retain the Fortune Brands stock for now, as is suggested by its Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for FBHS’ current-year earnings has been revised upward by approximately 1% in the past 60 days. Continued increase in manufacturing activities and easing supply-chain constraints should foster the company’s growth going forward.
Key Picks
Some better-ranked stocks within the broader Retail-Wholesale sector are as follows:
Arcos Dorados has an estimated earnings growth rate of 104.2% for the current year. Shares of ARCO have increased nearly 1% in the past three months.
Ruth's Hospitality Group carries a Zacks Rank #2. RUTH delivered a trailing four-quarter earnings surprise of 35.2%, on average.
Ruth's Hospitality has an estimated earnings growth rate of 24.8% for the current year. Shares of RUTH have gained approximately 9% in the past three months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Key Reasons to Hold on to Fortune Brands (FBHS) Stock for Now
Fortune Brands Home & Security stands to benefit from its pricing actions and cost-control measures despite supply-chain constraints and raw material cost inflation. The company’s commitment to reward its shareholders through dividends and share buybacks raises optimism in the stock.
Despite short-term softness in the U.S. housing market due to inflation and rising interest rates, Fortune Brands expects to benefit from strong fundamentals over the long term. Strong sales in the core U.S. market and strength across brands and innovation bode well for the company. Higher decking sales and volume growth at its door brand, Therma-Tru, are boosting revenues at the Outdoors and Security segment. Higher commercial sales are driving revenues from Security. For 2022, the company expects Outdoors and Security net sales to increase 10-12% from the year-ago level.
Transformational efforts and volume growth are supporting growth of the Cabinets segment. For 2022, Fortune Brands expects net sales to increase 10-12% year over year. Strong order volumes and elevated backlog levels should continue to act as catalysts behind the company’s growth. 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%.
Fortune Brands Home & Security, Inc. Price and Consensus
Fortune Brands Home & Security, Inc. price-consensus-chart | Fortune Brands Home & Security, Inc. Quote
Pricing actions and cost-control measures are helping Fortune Brands offset inflationary pressure, thus leading to the improved top-line (up 9% year over year in the second quarter) and margin performance. For instance, Outdoors and Security operating margin improved 70 basis points in the second quarter from the prior-year quarter, despite supply-chain constraints and cost inflation. For 2022, the company expects adjusted earnings of $6.36-$6.50 per share, suggesting an increase from $5.73 reported in the previous year. The company continues to invest in core competencies, including brand-building, product innovation, digital initiatives, category management and capacity and distribution expansion. These investments are expected to drive long-term growth.
Fortune Brands’ efforts to consistently reward its shareholders through dividends and share buybacks are encouraging. In the first six months of 2022, FBHS rewarded its shareholders with a dividend payout of $73.6 million, up 2.2% year over year. In the same period, the company bought back shares worth approximately $505 million, up more than 200% year over year. In March 2022, the company authorized the repurchase of up to $750 million worth of shares (set to expire on Mar 1, 2024). This was in addition to $400 million buyback authorized in July 2021 (set to expire on Jul 23, 2023). In December 2021, the company hiked its dividend by 7%.
In July 2022, Fortune Brands acquired Aqualisa Holdings, a manufacturer of smart and digital shower products. The acquisition strengthens the company’s Water Innovations business by enabling it to leverage growth accelerants in water management, connected products and global sustainability. By complementing its portfolio of smart water management offerings, the Aqualisa acquisition should help Fortune Brands expand sales in the United States, U.K. and Europe, as well as enter new markets over time.
In light of the above-mentioned positives, we believe investors should retain the Fortune Brands stock for now, as is suggested by its Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for FBHS’ current-year earnings has been revised upward by approximately 1% in the past 60 days. Continued increase in manufacturing activities and easing supply-chain constraints should foster the company’s growth going forward.
Key Picks
Some better-ranked stocks within the broader Retail-Wholesale sector are as follows:
Arcos Dorados (ARCO - Free Report) carries a Zacks Rank #2 (Buy). ARCO pulled a trailing four-quarter earnings surprise of 102.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
Arcos Dorados has an estimated earnings growth rate of 104.2% for the current year. Shares of ARCO have increased nearly 1% in the past three months.
Ruth's Hospitality Group carries a Zacks Rank #2. RUTH delivered a trailing four-quarter earnings surprise of 35.2%, on average.
Ruth's Hospitality has an estimated earnings growth rate of 24.8% for the current year. Shares of RUTH have gained approximately 9% in the past three months.