Fortune Brands Home & Security, Inc. FBHS , yesterday, has priced an offering of $600 million worth of senior unsecured notes due to expire on Sep 21, 2023. Subject to customary closing conditions, this offering is anticipated to close on Sep 21, 2018.
Per the company, senior notes offered have been priced at 99.969% of the principal amount. Further, these notes carry a coupon rate of 4%, which will be paid semi-annually on Mar 21 and Sep 21. The first interest payment will be made on Mar 21, 2019.
Ratings of the issuance are expected to be 'Baa3 (stable)' by Moody's Investors Service and 'BBB+ (stable)' by Standard & Poor's Ratings Services.
Fortune Brands intends to use net proceeds from the issuance of these senior notes for repaying dues under the existing revolving credit facility. Fortune Brands' High Debt Profile
The company has a highly leveraged balance sheet. Its long-term debt has increased roughly 33.9% (CAGR) in the last five years (2013-2017), with total debt/total equity increasing from 13.2% in 2013 to 58% in 2017. The trajectory continued in 2018 as well.
Exiting the second quarter of 2018, the company's debt balance was at $1.8 billion, reflecting growth of 16.6% from the last-reported quarter. Its total debt/total equity in the second quarter end was 98.6% versus 80.1% in the first quarter and way higher than 58% at the end of 2017.
Although the current notes offering will help in repaying debts under revolving credit facility, we believe that it will also add to the company's existing debt balance. Unwarranted rise in debt levels, in turn, can inflate its financial obligations and hurt profitability. Zacks Rank & Stocks to Consider
With a market capitalization of $7.9 billion, Fortune Brands presently carries a Zacks Rank #3 (Hold). The company stands to gain from solid product portfolio, shareholder-friendly policy and buyouts. Recently, it completed the acquisition of North Carolina-based Fiberon, LLC. This buyout has become part of the company's Doors & Security segment and is likely to increase growth opportunities in the outdoor living space.
However, the company currently faces headwinds from rising costs and expenses. Moreover, huge debt remains a problem. It's worth mentioning here that the company funded the Fiberon buyout with borrowings and available cash.
Over the past month, Fortune Brands' shares have declined 0.9%, as against 3.3% decrease recorded by the industry
Furthermore, the stock's earnings estimates are currently pegged at $3.64 for 2018 and $4.14 for 2019, reflecting decline of 0.3% and growth of 0.2% from respective 30-day-ago tallies. Fortune Brands Home & Security, Inc. Price and Consensus
Fortune Brands Home & Security, Inc. Price and Consensus | Fortune Brands Home & Security, Inc. Quote
Some better-ranked stocks in the industry are Ituran Location and Control Ltd. ITRN , SuperCom, Ltd. SPCB and Brady Corporation BRC . While both Ituran Location and SuperCom sport a Zacks Rank #1 (Strong Buy), Brady Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
In the past 60 days, earnings estimates on these three stocks improved for the current year and the next. Further, earnings surprise for the last quarter was a positive 16.33% for Ituran Location, 600% for SuperCom and 9.62% for Brady.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Brady Corporation (BRC): Free Stock Analysis Report Fortune Brands Home & Security, Inc. (FBHS): Free Stock Analysis Report SuperCom, Ltd. (SPCB): Free Stock Analysis Report Ituran Location and Control Ltd. (ITRN): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research