A month has gone by since the last earnings report for Fortune Brands Home & Security . Shares have added about 11.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Fortune Brands Home & Security due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Fortune Brands Q3 Earnings Beat, Revenues Miss
Fortune Brands reported third-quarter 2022 earnings before charges/gains of $1.79 per share, which surpassed the Zacks Consensus Estimate of $1.70 by 5.3%. On a year-over-year basis, the bottom line increased 20.1%.
In the third quarter, Fortune Brands’ net sales were $2,053.7 million, increasing 3.4% from the year-ago quarter. The improvement was driven by solid performances across most segments. However, the top line missed the consensus estimate of $2,078 million by 1.2%.
Segmental Details
Cabinets’ quarterly net sales grew 20% year over year to $858.2 million. Results were driven by prices across all product categories.
Water Innovations net sales decreased 14% year over year to $635.1 million. This downside was induced by continued inventory destocking and softness in China.
Outdoors & Security’s net sales increased 6% year over year to $560.4 million on the back of favorable pricing across all product categories.
Costs & Expenses
In the third quarter, Fortune Brands’ cost of sales increased 2.4% year over year to $1,310.2 million. The metric represented 63.8% of net sales compared with 64.4% in the year-ago quarter. Selling, general and administrative expenses increased 3.8% to $415.3 million, accounting for 20.2% of the net sales compared with 20.1% a year ago.
Operating income before charges/gains increased 14.2% to $334.9 million. Operating margin before charges/gains was 16.3%, up 150 basis points year over year. Interest expenses increased 60.7% to $33.1 million.
Balance Sheet
While exiting the third quarter of 2022, Fortune Brands’ cash and cash equivalents were $345.3 million, down 26.8% from $471.5 million at the end of the fourth quarter of 2021. Its long-term debt increased 20.7% to $2,786.9 million from $2,309.8 million recorded at the end of the fourth-quarter 2021.
In the first nine months of 2022, net cash generated from operating activities was $288.8 million compared with $430.8 million generated in the year-ago period. Capital expenditure amounted to $175.1 million, up from $113.0 million in the year-ago period. Its free cash flow was $122.4 million compared with $352.1 million free cash flow in the year-ago period.
In the first nine months of 2022, Fortune Brands rewarded its shareholders with a dividend payout of $109.8 million, up 1.8% year over year. The amount spent on purchasing treasury stock totaled $531.1 million, up 110%.
Outlook
For 2022, Fortune Brands lowered its full-year outlook due to more-than-anticipated channel inventory reductions and headwinds related to slowing new construction and R&R activity.
FBHS expects sales to decrease 4.5-5.5% compared to 6.5-7.5% stated earlier, from the previous year’s level on the back of its expectation of U.S. home products’ market growth of 3-5% and global home products’ market growth of 2-4%. Earnings before charges/gains are adjusted to $6.20-$6.30 per share from the earlier issued projection of $6.36-$6.50.
For 2022, cash flow from operations is anticipated to be $640.9-$715.9 million compared with $881-$951 million projected earlier, while capital expenditures are likely to be $250-$275 million compared with $300-$330 million projected earlier.
Management anticipates a free cash flow generation of $400-$450 million compared with the previous projection of $590-$630 millio
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -13.07% due to these changes.
VGM Scores
At this time, Fortune Brands Home & Security has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Fortune Brands Home & Security has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Fortune Brands Home & Security (FBHS) Up 11.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Fortune Brands Home & Security . Shares have added about 11.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Fortune Brands Home & Security due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Fortune Brands Q3 Earnings Beat, Revenues Miss
Fortune Brands reported third-quarter 2022 earnings before charges/gains of $1.79 per share, which surpassed the Zacks Consensus Estimate of $1.70 by 5.3%. On a year-over-year basis, the bottom line increased 20.1%.
In the third quarter, Fortune Brands’ net sales were $2,053.7 million, increasing 3.4% from the year-ago quarter. The improvement was driven by solid performances across most segments. However, the top line missed the consensus estimate of $2,078 million by 1.2%.
Segmental Details
Cabinets’ quarterly net sales grew 20% year over year to $858.2 million. Results were driven by prices across all product categories.
Water Innovations net sales decreased 14% year over year to $635.1 million. This downside was induced by continued inventory destocking and softness in China.
Outdoors & Security’s net sales increased 6% year over year to $560.4 million on the back of favorable pricing across all product categories.
Costs & Expenses
In the third quarter, Fortune Brands’ cost of sales increased 2.4% year over year to $1,310.2 million. The metric represented 63.8% of net sales compared with 64.4% in the year-ago quarter. Selling, general and administrative expenses increased 3.8% to $415.3 million, accounting for 20.2% of the net sales compared with 20.1% a year ago.
Operating income before charges/gains increased 14.2% to $334.9 million. Operating margin before charges/gains was 16.3%, up 150 basis points year over year. Interest expenses increased 60.7% to $33.1 million.
Balance Sheet
While exiting the third quarter of 2022, Fortune Brands’ cash and cash equivalents were $345.3 million, down 26.8% from $471.5 million at the end of the fourth quarter of 2021. Its long-term debt increased 20.7% to $2,786.9 million from $2,309.8 million recorded at the end of the fourth-quarter 2021.
In the first nine months of 2022, net cash generated from operating activities was $288.8 million compared with $430.8 million generated in the year-ago period. Capital expenditure amounted to $175.1 million, up from $113.0 million in the year-ago period. Its free cash flow was $122.4 million compared with $352.1 million free cash flow in the year-ago period.
In the first nine months of 2022, Fortune Brands rewarded its shareholders with a dividend payout of $109.8 million, up 1.8% year over year. The amount spent on purchasing treasury stock totaled $531.1 million, up 110%.
Outlook
For 2022, Fortune Brands lowered its full-year outlook due to more-than-anticipated channel inventory reductions and headwinds related to slowing new construction and R&R activity.
FBHS expects sales to decrease 4.5-5.5% compared to 6.5-7.5% stated earlier, from the previous year’s level on the back of its expectation of U.S. home products’ market growth of 3-5% and global home products’ market growth of 2-4%. Earnings before charges/gains are adjusted to $6.20-$6.30 per share from the earlier issued projection of $6.36-$6.50.
For 2022, cash flow from operations is anticipated to be $640.9-$715.9 million compared with $881-$951 million projected earlier, while capital expenditures are likely to be $250-$275 million compared with $300-$330 million projected earlier.
Management anticipates a free cash flow generation of $400-$450 million compared with the previous projection of $590-$630 millio
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -13.07% due to these changes.
VGM Scores
At this time, Fortune Brands Home & Security has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Fortune Brands Home & Security has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.