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Fortune Brands (FBHS) Q4 Earnings: What's in the Cards?

Protection safety equipment & services provider Fortune Brands Home & Security, Inc.FBHS is slated to report fourth-quarter 2017 results on Feb 1, after the market closes .

In the last four quarters, the company delivered better-than-expected results, pulling off an average positive earnings surprise of 6.27%. In the last quarter, earnings of 83 cents per share topped the Zacks Consensus Estimate by 1.22%.

The stock carries a Zacks Rank #2 (Buy). In the last three months, the company's shares have yielded 10.4% return, outperforming roughly 1.5% gain of the industry it belongs to.

Let us see how things are shaping up for Fortune Brands this quarter.

Factors to Affect Q4 Results

Fortune Brands will gain from the strengthening U.S. housing market in the quarter. Housing starts exhibited solid month-over-month gains in October and November but slipped 8.2% in December. Overall, housing starts in the fourth quarter were up roughly 6.7% from the previous quarter. Favorable population and robust labor market are likely to lead to new constructions while aging existing construction will raise demand for repair and remodelling services.

In the fourth quarter, Fortune Brands anticipates Cabinets segment's sales to grow in the mid-single digit range. This segment deals with manufacturing and selling of custom, semi-custom and stock cabinetry and vanities.

The company's Cabinets segment failed to meet the Zacks Consensus Estimate in two of the first three quarters of 2017 while surpassing it in one. The segment's sales in the fourth quarter are estimated to be $634 million, above $614 million generated in the last quarter. As reported by Kitchen Cabinet Manufacturers Association, cabinetry sales in January-November 2017 grew 2.8% year over year, with stock cabinet sales and semi-custom sales increasing 3% and 3.5%, respectively. However, custom cabinet sales slipped 0.4%.

Also, Fortune Brands anticipates sales in the Doors segment to increase in mid-single digits in 2017 while Security segment's sales are predicted to increase in mid-single digits in the fourth quarter. The plumbing segment will benefit from new brand additions.

The Zacks Consensus Estimate for the Doors segment's revenues stand at $130 million for the fourth quarter, below $138 million reported in the third quarter. The consensus estimate for the Security segment is $162, above $158 million recorded in the previous quarter, and for the Plumbing segment is $457 million, above $438 million in the third quarter.

In addition, we believe that development of new products, addition of well-known brands through acquisitions and favorable impact of foreign currencies might be possible tailwinds in the quarter. On the flip side, headwinds like sudden inflation in raw materials price or supply shortage, industry competition and burden of high debt levels might affect results.

Stocks to Consider

Our proven model provides some idea on the stocks that are about to release their earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

However, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Here are some companies in the Zacks Industrial Products sector you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Kennametal Inc. KMT , with an Earnings ESP of +2.21% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Emerson Electric Company EMR , with an Earnings ESP of +1.39% and a Zacks Rank #3.

Nordson Corporation NDSN , with an Earnings ESP of +1.02% and a Zacks Rank #3.

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Kennametal Inc. (KMT): Free Stock Analysis Report

Emerson Electric Company (EMR): Free Stock Analysis Report

Nordson Corporation (NDSN): Free Stock Analysis Report

Fortune Brands Home & Security, Inc. (FBHS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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