It has been about a month since the last earnings report for Fortune Brands Home & Security (FBHS - Free Report) . Shares have added about 0.8% 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 Q1 Earnings & Revenues Top Estimates
Fortune Brands delivered a positive earnings surprise of 6.8% for the first quarter of 2019.
Earnings before charges/gains were 63 cents per share, beating the Zacks Consensus Estimate of 59 cents. On a year-over-year basis, the bottom line improved 12.5% on the back of sales growth.
Fortune Brands’ net sales were $1,327.9 million, increasing 5.8% from the year-ago figure. The improvement was driven by healthy growth in Plumbing, Cabinets and Doors & Security segments.
Also, the top line surpassed the Zacks Consensus Estimate of $1,309 million.
The company’s segmental results are discussed below:
The Cabinets segment’s sales increased 2.8% year over year to $573 million. As noted, growth in sales of value products in homecenter, builder direct and dealer business led the improvement.
Plumbing sales jumped 2% to $458.6 million on the back of organic sales growth of 3.5%.
The Doors & Security segment’s sales increased 20% year over year to $296.3 million, backed by gains from buyouts of Fiberon and rise in sales from security products.
Costs & Expenses
In the first quarter, Fortune Brands’ cost of sales before charges/gains increased 7% year over year to $869.1 million. It represented 65.4% of net sales compared with 65% in the year-ago quarter. Selling, general and administrative expenses before charges/gains jumped 0.3% to $312 million and represented 23.5% of the net sales versus 24.8% in the year-ago quarter.
Operating income before charges/gains increased 13.6% year over year to $135.6 million. Operating margin before charges/gains improved 70 basis points to roughly 10.2%. Interest expenses surged 61.2% to $23.7 million.
Exiting the first quarter, Fortune Brands’ cash and cash equivalents were $281.2 million, up 7% from $262.9 million at the end of the 2018. Its long-term debt increased 19.9% sequentially to $2,169.7 million.
In first quarter, the company used net cash of $89.7 million from operating activities, reflecting 72.8% increase year over year. Capital expenditure amounted to $27.2 million, down from $37.6 million.
For 2019, Fortune Brands anticipates the both U.S. home products market and global market to grow 2-4%.
Sales in the year are expected to increase 6-7.5% from the previous year. Earnings before charges/gains are estimated to be $3.53-$3.77 per share, reflecting growth of 9% at the mid-point.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
Currently, Fortune Brands Home & Security has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Fortune Brands Home & Security has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.