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Fortune Brands (FBHS) Gains From Business Strength, Risks Persist
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On Apr 12, we issued an updated research report on Fortune Brands Home & Security, Inc. .
In the past three months, this Zacks Rank #3 (Hold) stock has returned 14.6% compared with the industry’s growth of 31.6%.
Present Scenario
Fortune Brands is well poised to benefit from strength in the U.S. housing market, backed by expected new construction growth and product introductions. Notably, strength across the company’s plumbing business, supported by growing popularity of brands and incremental investments in brands, will likely be advantageous. In addition, solid demand for doors and decking products, along with strength in its security business, is likely to drive its performance in the quarters ahead.
Also, the company’s LARSON Manufacturing buyout (acquired in December 2020) is anticipated to strengthen its foothold in the doors and decking space. Further, strength in Fortune Brands’s Fiberon business (acquired in September 2018) has been complementing its existing door brand, Therma-Tru. Notably, Fiberon decking brand grew more than 30% in the fourth quarter of 2020.
In addition, it remains dedicated toward increasing shareholders’ wealth through dividend payouts and share buybacks. In 2020, the company repurchased shares worth $187.6 million and paid out dividends worth $133.3 million. Also, in September 2020, its board of directors approved a $500-million share repurchase plan, which is valid till Sep 21, 2022. Further, it hiked its quarterly dividend rate by 8% in December 2020.
However, the company’s high-debt profile poses a major concern. Exiting 2020, its long-term debt was $2,572.2 million. Any further increase in debt levels can raise its financial obligations and hurt profitability.
Moreover, Fortune Brands has been experiencing escalating cost of sales over time. Notably, in 2020, its cost of sales and its selling, general and administrative expenses jumped 6% and 2%, respectively, on a year-over-year basis. Further rise in costs might weigh on its margins in the quarters ahead.
RH delivered a positive earnings surprise of 30.41%, on average, in the trailing four quarters.
Williams-Sonoma delivered a positive earnings surprise of 222.25%, on average, in the trailing four quarters.
Tempur Sealy delivered a positive earnings surprise of 28.85%, in the last reported quarter.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Image: Bigstock
Fortune Brands (FBHS) Gains From Business Strength, Risks Persist
On Apr 12, we issued an updated research report on Fortune Brands Home & Security, Inc. .
In the past three months, this Zacks Rank #3 (Hold) stock has returned 14.6% compared with the industry’s growth of 31.6%.
Present Scenario
Fortune Brands is well poised to benefit from strength in the U.S. housing market, backed by expected new construction growth and product introductions. Notably, strength across the company’s plumbing business, supported by growing popularity of brands and incremental investments in brands, will likely be advantageous. In addition, solid demand for doors and decking products, along with strength in its security business, is likely to drive its performance in the quarters ahead.
Also, the company’s LARSON Manufacturing buyout (acquired in December 2020) is anticipated to strengthen its foothold in the doors and decking space. Further, strength in Fortune Brands’s Fiberon business (acquired in September 2018) has been complementing its existing door brand, Therma-Tru. Notably, Fiberon decking brand grew more than 30% in the fourth quarter of 2020.
In addition, it remains dedicated toward increasing shareholders’ wealth through dividend payouts and share buybacks. In 2020, the company repurchased shares worth $187.6 million and paid out dividends worth $133.3 million. Also, in September 2020, its board of directors approved a $500-million share repurchase plan, which is valid till Sep 21, 2022. Further, it hiked its quarterly dividend rate by 8% in December 2020.
However, the company’s high-debt profile poses a major concern. Exiting 2020, its long-term debt was $2,572.2 million. Any further increase in debt levels can raise its financial obligations and hurt profitability.
Moreover, Fortune Brands has been experiencing escalating cost of sales over time. Notably, in 2020, its cost of sales and its selling, general and administrative expenses jumped 6% and 2%, respectively, on a year-over-year basis. Further rise in costs might weigh on its margins in the quarters ahead.
Stocks to Consider
Some better-ranked stocks from the same space are RH (RH - Free Report) , Williams-Sonoma, Inc. (WSM - Free Report) and Tempur Sealy International, Inc. (TPX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
RH delivered a positive earnings surprise of 30.41%, on average, in the trailing four quarters.
Williams-Sonoma delivered a positive earnings surprise of 222.25%, on average, in the
trailing four quarters.
Tempur Sealy delivered a positive earnings surprise of 28.85%, in the last reported quarter.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>