Fortune Brands (FBHS) To Post Q4 Earnings: What's In Store?

Fortune Brands Home & Security, Inc. (NYSE:FBHS) is scheduled to report fourth-quarter 2019 results on Jan 29, after market close.

In the trailing four quarters, the company delivered negative earnings surprise of 0.95%, on average. In the third quarter, it posted earnings of 95 cents, which missed the Zacks Consensus Estimate of 97 cents by 2.06%.

In the past three months, the stock has gained 14.6% compared with the industry’s rally of 6.3%.

Factors at Play

Strength across Fortune Brands’ master lock business, supported by its incremental investments for capacity and product line expansion, is likely to have boosted fourth-quarter revenues of the Doors & Security segment. Also, strong demand in the United States and China markets, coupled with expanded product offerings, is likely to have supported the company’s Plumbing segment’s revenues. In addition, antidumping duties, along with investments in innovations, might have supported the Cabinets segment.

Also, the company’s acquisition of Fiberon (September 2018), which has been complementing its existing door brand — Therma-Tru — and enhancing growth opportunities in the outdoor living space, is likely to have boosted fourth-quarter revenues as well. Further, the distribution partnership with OrePac (inked in July 2019), which has enabled Fiberon business to expand product offerings in the western region of the United States, is likely to have proven beneficial for its top line in the quarter.

However, softness in the construction market in Canada and weak demand for building products in the United States is likely to have hurt its fourth-quarter sales. In addition, escalating cost of sales has been a persistent concern for Fortune Brands. For instance, in second and third quarter, the company's cost of sales jumped 7% and 5% year over year, respectively, on account of material price inflation and rising freight charges. Moreover, in the third quarter, selling, general and administrative expenses increased 2%. High costs and expenses are likely to have adversely impacted the company’s margin and profitability in the fourth quarter as well.

Amid this backdrop, the Zacks Consensus Estimate for the Plumbing segment's revenues is pegged at $526 million, reflecting growth of 7.8% from the year-ago reported figure. The consensus mark for Doors & Security segment’s revenues stands at $327 million, implying 6.3% increase. The consensus estimate for Cabinets segment’s revenues stands at $624 million, almost in line with its reported figure in prior-year quarter.

Earnings Whispers

According to our quantitative model a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Fortune Brands has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 97 cents.

Zacks Rank: Fortune Brands carries a Zacks Rank #3.

Key Picks

Here are some companies you may want to consider as our model shows that these have the right mix of elements to beat estimates this earnings season:

Tennant Company (NYSE:TNC) has an Earnings ESP of +4.20% and a Zacks Rank of 2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Rexnord Corporation (NYSE:RXN) has an Earnings ESP of +1.58% and a Zacks Rank of 3.

Stanley Black & Decker, Inc. (NYSE:SWK) has an Earnings ESP of +1.21% and a Zacks Rank #3.

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