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Fortune Brands (FBHS) Q1 Earnings & Revenues Beat Estimates

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Fortune Brands Home & Security, Inc. (FBHS - Free Report) reported first-quarter 2020 earnings before charges/gains of 81 cents per share, surpassing the Zacks Consensus Estimate of 69 cents. On a year-over-year basis, the bottom line improved 28.6%, backed by sales growth.

Fortune Brands’ net sales were $1,402.7 million, increasing 6% from the year-ago figure. The rise was driven by healthy growth in Cabinets, and Doors & Security segments. Also, the top line beat the consensus estimate of $1,376 million.

Segmental Details

Cabinets’ sales jumped 8% year over year to $620 million. Growth in sales of value products more than offset the weakness in premium products.

Plumbing sales increased 2% to $469 million on the back of impressive performance in the United States, partially offset by the negative impacts of the coronavirus-led market downturn and forex woes.

Doors & Security’s sales jumped 6% to $313.7 million, backed by robust sales growth of doors and composite decking products.

Costs & Expenses

In the first quarter, Fortune Brands’ cost of sales before charges/gains increased 5% year over year to $909.5 million. It represented 64.8% of net sales compared with 65.4% in the year-ago quarter. Selling, general and administrative expenses increased 1% to $313.9 million, and represented 22.4% of the net sales compared with 23.5% a year ago.

Operating income before charges/gains increased 19.6% to $169.8 million. Operating margin before charges/gains climbed 140 basis points to 12.1%. Interest expenses decreased 7% to $22.1 million.

Balance Sheet

Exiting the first quarter, Fortune Brands’ cash and cash equivalents were $359.7 million, down 7.3% from $387.9 million at the end of 2019. Its long-term debt climbed 14% to $2,035.2 million sequentially.

In the first three months of 2020, net cash used by operating activities was $13.8 million compared with $89.7 million used in the year-ago comparable period. Capital expenditure amounted to $26.9 million, down from $27.2 million in the year-ago period.

Outlook

For 2020, Fortune Brands believes that the coronavirus outbreak-led market downturn will adversely impact its results, particularly in the second and third quarters.

On uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, the company has now suspended its guidance for 2020.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks are Acco Brands Corporation (ACCO - Free Report) , CECO Environmental Corp. (CECE - Free Report) and Intellicheck, Inc. (IDN - Free Report) . All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acco Brands delivered a positive earnings surprise of 19.04%, on average, in the trailing four quarters.

CECO Environmental delivered a positive earnings surprise of 26.98%, on average, in the trailing four quarters.

Intellicheck delivered a positive earnings surprise of 36.91%, on average, in the trailing four quarters.

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