Fortune: Let's Get It On
Sidhi is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Fortune Brands Home & Security (NYSE: FBHS) is a business engaged in manufacturing of home and security products. The company fulfills the dreams of homeowners and helps people feel more secure. The Company's trusted brands represent a premier name in the Building Products sector, which includes Master Lock security products, MasterBrand cabinets, Moen faucets, Simonton windows and Therma-Tru entry door systems. The company was spun off from Fortune Brands in 2011. Since then, the stock is up 76% to date.
On October 23, the company reported strong quarterly results of $0.29 earnings per share on revenue of $909 million, beating analysts’ estimates by 4 cents. The earnings per share exceeded last year’s quarterly earnings by 45%, thanks to robust growth and cost-savings schemes of the company. Revenue increased 7.2% as compared to the previous year’s quarter.
Operating income surged 34.5% to $72.9 million. Higher sales volume from an improving U.S. home products market, price increases, and new product launches helped the company to beat analysts’ total revenue estimates by $9 million.
The company continued to hold market leadership in all of its four business segments. Let’s have a look.
Kitchen & Bath Cabinetry: This segment manufactures custom, semi-custom, and stock cabinetry for the kitchen, bath, and other parts of the home in North America. Net sales were up 6%, primarily due to product line expansion amid strength in new construction. This segment offers its products under the brand names Aristokraft, Omega, Kitchen Craft, Schrock, Diamond, HomeCrest, Decor, Kemper, Thomasville, Martha Stewart Living, Kitchen Classics, and Reflections.
Plumbing & Accessories: Net sales were up 12%, with gains continuing in the U.S. wholesale business, as well as success in international markets. This segment manufactures and assembles faucets, accessories, and kitchen sinks under the Moen brand name.
Advanced Material Windows & Door Systems: Net sales were up 7%, primarily on door sales growth in the wholesale channel. It manufactures and sells fiberglass and steel entry door systems. Door products which are heavily driven by new construction saw double-digit sales gains.
Security & Storage: Net sales were up 2%, with security product sales growing at a mid-single-digit rate driven by growth in U.S. retail and global safety products. This segment provides locks, safety, and security devices and electronic security products. The Master Lock brand continues to hit the mark with products like new electronic combination lock Dial Speed.
Masco Corporation and American Woodmark Corporation are the top two peers of Fortune Brands Home & Security.
Masco (NYSE: MAS) is one of the world's leading manufacturers of home improvement and building products. Some brands owned by it are Kraftmaid, Delta, Peerless, Aqua Glass, Mirolin, and Behr. Approximately 80% of the Company’s sales are generated through operations in North America (primarily in the United States). It recently announced quarterly dividend of $.075 per common share, payable on February 4, 2013, providing dividend yield of 1.73%.
American Woodmark (NASDAQ: AMWD) manufactures kitchen cabinets and vanities for the remodeling and new home construction markets. The company with market cap of $376.1 million, reported robust second-quarter fiscal 2013 earnings of 14 cents surpassing analysts’ estimate by 180%. Analysts’ has upgraded the future estimate of this company by 58.3% to 38 cents representing a year-over-year increase of 150.3%.
The company raised its future outlook to be between 86 cents and 88 cents earnings per share, up from the prior forecast of 77 cents to 87 cents for the current fiscal year. The company has also increased its free cash flow outlook for 2012 to be in excess of $275 million, with net sales to increase at a high-single-digit rate.
Fortune Brands Home & Security has a one year low of $15.20 and a one year high of $30.50. The company has a market cap of $4.816 billion and a P/E ratio of 34.12x, reflecting a 99.4% above the S&P 500 P/E ratio of 17.7x. However, the stock also looks attractive on a price-to-book (P/B) value basis. The P/B multiple for the stock is 2.06, reflecting a discount of 7.2% to the peer group average of 2.22.
As of September 30, 2012, the company had strong cash flows of $216 million, and debt was down to $345 million. This marks its ability to fund internal growth, make acquisitions, repay debt and related interest, pay dividends and repurchase common stock.
The Final Look
This home and security products maker is exhibiting positive trends for the fiscal year 2012 and 2013 on the basis of strong third quarter earnings performance and subsequent estimate revisions to the upside. As in the above discussion, the company’s strength can be seen in its quality products, new product innovations, and strong presence in the replace-and-remodel segment of the housing market, efficient cost structure and consistent track record of above market sales growth. Thus, you will definitely have good fortune if you include this stock in your portfolio.
sidhikharkia has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!