Fortune Brands' (FBHS) Earnings Beat, Revenues Miss In Q4

Fortune Brands Home & Security, Inc. (NYSE:FBHS) reported fourth-quarter 2019 earnings before charges/gains of $1 per share, surpassing the Zacks Consensus Estimate of 97 cents. On a year-over-year basis, the bottom line improved 16%, backed by sales growth.

In 2019, the company’s earnings before charges/gains were $3.60 per share, increasing 8% from the year-ago figure of $3.34.

Fortune Brands’ net sales were $1,470.5 million, increasing 4% 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 $1,481 million.

Net sales in 2019 were $5,764.6 million, increasing 5% year over year, driven by solid momentum in Plumbing and Doors & Security segments.

Fortune Brands Home & Security, Inc. Price, Consensus and EPS Surprise

Segmental Details

Cabinets’ sales decreased 5% year over year to $590.8 million. Growth in sales of value products was offset by weakness in premium products.

Plumbing sales jumped 12% to $548.4 million on the back of impressive performance in China and the United States.

Doors & Security’s sales increased 8% to $331.3 million, backed by robust sales growth of composite decking along with solid operating performance in security products.

Costs & Expenses

In the fourth quarter, Fortune Brands’ cost of sales before charges/gains increased 2% year over year to $938.7 million. It represented 63.8% of net sales compared with 64.7% in the year-ago quarter. Selling, general and administrative expenses jumped 1% to $312.4 million, and represented 21.2% of the net sales compared with 21.7% a year ago.

Operating income before charges/gains increased 37% to $192.5 million. Operating margin before charges/gains climbed 320 basis points to roughly 13.1%. Interest expenses decreased 4% to $22.4 million.

Balance Sheet

Exiting the fourth quarter, Fortune Brands’ cash and cash equivalents were $387.9 million, up 47.5% from $262.9 million at the end of the 2018. Its long-term debt decreased 1.3% to $1,784.6 million.

In 2019, net cash provided by operating activities were $637.2 million, reflecting 5.5% increase year over year. Capital expenditure amounted to $131.8 million, down from $150.1 million.

Outlook

For 2020, Fortune Brands anticipates moderate growth in markets while seeks to focus on operational improvements. The company expects the U.S. home products market to grow 4-6% in the year and the global market to grow 3-5%.

Sales for the year are expected to increase 5-6% from 2019. Earnings before charges/gains are estimated to be $3.83-$4.03 per share, reflecting year-over-year growth of 9.2% at the mid-point.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the broader industry are Graco Inc. (NYSE:GGG) , Alarm.com Holdings, Inc. (NASDAQ:ALRM) and Johnson Controls International plc (NYSE:JCI) . While Graco sports a Zacks Rank #1 (Strong Buy), Alarm.com and Johnson Controls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Graco has a long-term earnings growth rate of 11.5%.

Alarm.com has a long-term earnings growth rate of 15%.

Johnson Controls has a long-term earnings growth rate of 9.7%.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>