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Fortune Brands (FBHS) Q3 Earnings & Revenues Miss Estimates

Fortune Brands Home & Security, Inc. FBHS reported financial results for third-quarter 2019, wherein earnings before charges/gains were 95 cents per share, missing the Zacks Consensus Estimate of 97 cents. Notably, on a year-over-year basis, the bottom line improved 2.2% on the back of sales growth.

Fortune Brands’ net sales were $1,459 million, increasing 6% from the year-ago figure. The rise was driven by healthy growth in Plumbing and Doors & Security segments.

However, the top line missed the consensus estimate of $1,489 million.

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. price-consensus-eps-surprise-chart | Fortune Brands Home & Security, Inc. Quote

Segmental Details

The company’s segmental results are discussed below:

Cabinets segment’s sales decreased 2% year over year to $589.7 million. Growth in sales of value products was offset by weakness in premium and semi-custom.

Plumbing sales jumped 11% to $514.1 million on the back of organic sales growth of about 12%.

Doors & Security segment’s sales increased 11% to $355.2 million, backed by gains from the buyout of Fiberon.

Costs & Expenses

In the third quarter, Fortune Brands’ cost of sales before charges/gains increased 5% year over year to $934.8 million. It represented 64.1% of net sales compared with 64.2% in the year-ago quarter. Selling, general and administrative expenses jumped 2% to $311.3 million, and represented 21.3% of the net sales compared with 22.1% a year ago.

Operating income before charges/gains increased 14% to $168 million. Operating margin before charges/gains climbed 80 basis points to roughly 11.5%. Interest expenses increased 24% to $23.6 million.

Balance Sheet

Exiting the third quarter, Fortune Brands’ cash and cash equivalents were $336.2 million, up 27.9% from $262.9 million at the end of the 2018. Its long-term debt increased 7.7% to $1,949 million from the end of last year.

In the first nine months of 2019, net cash provided by operating activities were $353.8 million, reflecting 2.9% increase year over year. Capital expenditure amounted to $82.4 million, down from $106.5 million.

Outlook

Sales for 2019 are expected to increase in the range of 5-6% compared with 5.5-6.5% rise predicted earlier. Earnings before charges/gains are estimated to be $3.53-$3.63 per share, lower than the $3.53-$3.67 guided previously.

Zacks Rank & Key Picks

Fortune Brands currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Cimpress N.V CMPR, Brady Corporation BRC and Dover Corporation DOV. While Cimpress sports a Zacks Rank #1 (Strong Buy), Brady and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cimpress’ earnings surprise in the last reported quarter was a positive 137.04%.

Brady delivered average positive earnings surprise of 9.68% in the trailing four quarters.

Dover pulled off average positive earnings surprise of 6.70% in the trailing four quarters.

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