Fortune Brands' (FBHS) Q2 Earnings In Line, Revenues Miss

Fortune Brands Home & Security, Inc. (NYSE:FBHS) reported its financial results for second-quarter 2019, wherein earnings before charges/gains were $1.03 per share, in line with the Zacks Consensus Estimate. Notably, on a year-over-year basis, the bottom line improved 3% on the back of sales growth.

Fortune Brands’ net sales were $1,507.2 million, increasing 5.5% from the year-ago figure. The rise was driven by healthy growth in Plumbing and Doors & Security segments.

However, the top line missed the consensus estimate of $1,526 million.

Segmental Details

The company’s segmental results are discussed below:

Cabinets segment’s sales decreased 0.4% year over year to $635 million. As noted, growth in sales of value products was offset by weakness in premium, semi-custom and Canada.

Plumbing sales jumped 5% to $506.1 million on the back of organic sales growth of 6%.

Doors & Security segment’s sales increased 19% to $366.1 million, backed by gains from the buyout of Fiberon.

Costs & Expenses

In the second quarter, Fortune Brands’ cost of sales before charges/gains increased 7% year over year to $969.6 million. It represented 64.3% of net sales compared with 63.3% in the year-ago quarter. Selling, general and administrative expenses jumped 1.3% to $320.6 million, and represented 21.3% of the net sales compared with 22.1% a year ago.

Operating income before charges/gains increased 7% to $202.4 million. Operating margin before charges/gains climbed 20 basis points to roughly 13.4%. Interest expenses surged 40.8% to $24.5 million.

Balance Sheet

Exiting the second quarter, Fortune Brands’ cash and cash equivalents were $276.3 million, up 5.1% from $262.9 million at the end of the 2018. Its long-term debt decreased 7.9% to $1,666 million from the end of last year.

In the first six months of 2019, net cash provided by operating activities were $112 million, reflecting 18.4% decrease year over year. Capital expenditure amounted to $54.9 million, down from $67.2 million in the year-ago period.

Outlook

Sales for 2019 are expected to increase in the range of 5.5-6.5% compared with 6-7.5% rise predicted earlier. Earnings before charges/gains are estimated to be $3.53-$3.67 per share, lower than the $3.53-$3.77 guided previously.

Zacks Rank & Key Picks

Fortune Brands currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are DXP Enterprises, Inc. (NASDAQ:DXPE) , Dover Corporation (NYSE:DOV) and Roper Technologies, Inc. (NYSE:ROP) . All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DXP Enterprises delivered average earnings surprise of 48.47% in the trailing four quarters.

Dover pulled off average positive earnings surprise of 6.91% in the trailing four quarters.

Roper delivered average earnings surprise of 6.92% in the trailing four quarters.

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