Hot Stock to Track After Earnings: Fortune Brands Home & Security, Inc. (NYSE:FBHS)

Fortune Brands Home & Security, Inc. (NYSE:FBHS) reported earnings for the three months ended Mar2016 on April 20, 2016. The company earned $0.39 per share on revenue of $1.11B. Analysts had been modeling earning per share of $0.34 with $1.1B in revenue.

Fortune Brands Home & Security, Inc. (NYSE:FBHS) announced first quarter 2016 results from continuing operations and increased its 2016 annual outlook for earnings per share.

Highlights from continuing operations demonstrating continued strong momentum:

• Q1 2016 sales increased 16 percent year-over-year to $1.1 billion


• EPS $0.35; EPS before charges/gains increased nearly 40 percent to $0.39


• Company increases full-year 2016 EPS before charges/gains to $2.50 – $2.60 on sales growth of 10 – 12 percent

First Quarter 2016

For the first quarter of 2016, sales were $1.1 billion, an increase of 16 percent over the first quarter of 2015. Earnings per share were $0.35, compared to $0.25 in the prior-year quarter. EPS before charges/gains were $0.39, compared to $0.28 the same quarter last year. Operating income was $95.5 million, compared to $67.3 million in the prior-year quarter. Operating income before charges/gains was $104.6 million, compared to $73.2 million the same quarter last year, up 43 percent.

“In the first quarter, sales increased 20 percent for our U.S. home products businesses. Operating margin before charges/gains for the total company grew significantly by 180 basis points to 9.5 percent, with solid performance across all operating segments,” Klein said.

For each segment in the first quarter of 2016, compared to the prior-year quarter:

• Cabinet sales increased 34 percent from the prior year and 12 percent excluding the impact of the Norcraft acquisition. Sales gains were strong across all channels and segment operating margin before charges/gains doubled to 6.8 percent.


• Plumbing sales increased 2 percent. Excluding the negative impact of currency and channel inventory reductions, sales increased approximately 6 percent.


• Door sales were up 13 percent with growth in both the wholesale and retail channels.


• Security sales increased 1 percent. Excluding the negative impact of currency and exited product lines, sales increased approximately 3.5 percent.

The company also repurchased more than 7.6 million shares for approximately $363 million during the quarter. The share repurchases positively impacted first quarter EPS by $0.01 and could provide an incremental $0.06 and $0.02 of EPS respectively for the full years 2016 and 2017. “At an average price of $47.43 we already see a significant return on the first quarter share repurchases,” said Lee Wyatt, chief financial officer. “Cash was $254 million and net debt to EBITDA was 2.0 times at the end of the quarter, giving us substantial flexibility to continue to create incremental shareholder value.”

Fortune Brands Home & Security, Inc. earnings per share showed an increasing trend of 14.6% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 303%.Analysts project EPS growth over the next 5 years at 15.73%. It has EPS annual growth over the past 5 fiscal years of 35.5% when sales grew 7.2. It reported 16.4% sales growth, and 40.7% EPS growth in the last quarter.

The stock is trading at $58.67, up 44.14% from 52-week low of $41.17. The stock trades down -1.92% from its peak of $59.98 and 5.33% above the consensus price target of $61.8. Its volume clocked up at 0.91 million shares which is lower than the average volume of 1.06 million shares. Its market capitalization currently stands at $9.04B.