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Fortune Brands (FBHS) Q1 Earnings & Revenues Top Estimates

Zacks Equity Research

Fortune Brands Home & Security, Inc. FBHS delivered a positive earnings surprise of 6.8% for the first quarter of 2019.

Earnings before charges/gains were 63 cents per share, beating the Zacks Consensus Estimate of 59 cents. On a year-over-year basis, the bottom line improved 12.5% on the back of sales growth.

Fortune Brands’ net sales were $1,327.9 million, increasing 5.8% from the year-ago figure. The improvement was driven by healthy growth in Plumbing, Cabinets and Doors & Security segments.

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

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

Also, the top line surpassed the Zacks Consensus Estimate of $1,309 million.

Segmental Details

The company’s segmental results are discussed below:

The Cabinets segment’s sales increased 2.8% year over year to $573 million. As noted, growth in sales of value products in homecenter, builder direct and dealer business led the improvement.

Plumbing sales jumped 2% to $458.6 million on the back of organic sales growth of 3.5%.

The Doors & Security segment’s sales increased 20% year over year to $296.3 million, backed by gains from buyouts of Fiberon and rise in sales from security products.

Costs & Expenses

In the first quarter, Fortune Brands’ cost of sales before charges/gains increased 7% year over year to $869.1 million. It represented 65.4% of net sales compared with 65% in the year-ago quarter. Selling, general and administrative expenses before charges/gains jumped 0.3% to $312 million and represented 23.5% of the net sales versus 24.8% in the year-ago quarter.

Operating income before charges/gains increased 13.6% year over year to $135.6 million. Operating margin before charges/gains improved 70 basis points to roughly 10.2%. Interest expenses surged 61.2% to $23.7 million.

Balance Sheet

Exiting the first quarter, Fortune Brands’ cash and cash equivalents were $281.2 million, up 7% from $262.9 million at the end of the 2018. Its long-term debt increased 19.9% sequentially to $2,169.7 million.

In first quarter, the company used net cash of $89.7 million from operating activities, reflecting 72.8% increase year over year. Capital expenditure amounted to $27.2 million, down from $37.6 million.

Outlook

For 2019, Fortune Brands anticipates the both U.S. home products market and global market to grow 2-4%.

Sales in the year are expected to increase 6-7.5% from the previous year. Earnings before charges/gains are estimated to be $3.53-$3.77 per share, reflecting growth of 9% at the mid-point.

Zacks Rank & Key Picks

Fortune Brands currently carries a Zacks Rank #4(Sell).

Some better-ranked stocks in the space are DXP Enterprises, Inc. DXPE, Cintas Corporation CTAS and Actuant Corporation ATU. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Cintas and Actuant carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises delivered average earnings surprise of 46.55% in the trailing four quarters.

Cintas pulled off average positive earnings surprise of 6.09% in the trailing four quarters.

Actuant delivered average earnings surprise of 11.01% in the trailing four quarters.

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