Who's benefiting from the housing recovery and the increase in
Fortune Brands Home & Security, Inc.
) is expected to see double digit earnings growth this year and in
2014 as consumers finally have started spending on their homes
again. This Zacks #1 Rank (Strong Buy) raised full year guidance
after a solid second quarter.
Fortune Brands Home & Security was created in Oct 2011 when it
was spun off from Fortune Brands. You probably know some of its
brands. It makes products such as MasterBrand cabinets, Moen
faucets, Simonton windows and Therma-True door systems. In the
security area, it also sells the Master Lock brand.
Sales Up 11% in Q2
On July 24, Fortune Brands Home & Security reported second
quarter results and surprised on the Zacks Consensus for the fourth
quarter in a row. The surprises are indicative of the turnaround in
the housing market over that time.
Sales jumped 11% year over year to $1.04 billion with its home
segments posting double digit sales growth. Kitchen & Bath
Cabinetry sales rose 13% while Plumbing & Accessories grew 15%.
It also saw some positive signs in its windows business.
Security & Storage sales were flat even as security sales rose
4%. It was offset by lower tool storage sales but it is
repositioning that business.
Paid First Dividend and Bought WoodCrafters
On June 19, the company paid its first quarterly cash dividend
since going public, of $0.10. This is a yield of 1%.
It also completed the acquisition of bathroom vanity maker
WoodCrafters Home Products for $300 million. This company will be
added to the Kitchen & Bath Cabinetry segment and will be
accretive to the year.
Raised 2013 Guidance
Given the strong first half of the year and the addition of
WoodCrafters, Fortune Brands Home & Security raised its full
year earnings guidance to $1.35 - $1.43 from $1.23 - $1.33 with 4
cents the result of the WoodCrafters acquisition.
The analysts scrambled to raise estimates after the solid earnings
report. 8 out of 8 estimates for 2013 moved higher since the
report, pushing the Zacks Consensus Estimate up to the high end of
the company's guidance range, to $1.42.
That would be earnings growth of 60% compared to 2012.
Analysts are equally as bullish about 2014 as earnings are forecast
to jump another 31%.
Buy the Growth
Fortune Brands Home & Security is a play on the housing
recovery. Most stocks in this space have soared over the last year
and FBHS is no exception. Shares are trading near 2-year highs.
They're not cheap though. Fortune Brands Home & Security has a
forward P/E of 29. But most investors are buying Fortune Brands
Home & Security for the double digit growth.
The housing recovery, especially in new construction, has only just
begun. Home starts aren't anywhere near "normal" levels which means
business should grow for companies like Fortune Brands.
The consumers' obsession with housing and home remodeling, which
was put on the back burner during the Great Recession, is also
making a comeback.
This is the best of all world's for a home-focused company such as
For growth investors looking for a way to play the housing
recovery, Fortune Brands Home & Security is one to keep on the
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FORTUNE BRD H&S (FBHS): Free Stock Analysis
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