Fortune Brands Home & Security, Inc. FBHS reported Q1 2022 earnings before charges/gains of $1.31 per share, which beat Zacks’ consensus estimate of $1.24 by 5.7%. Year-on-year, net income decreased by 3.7% due to higher cost of sales.
In the first quarter, Fortune Brands net sales were $1,917.3 million, up 8% from a year earlier. The improvement was driven by strong sector performance. Additionally, revenue exceeded the consensus estimate of $1,872 million by 2.4%.
Details by segment
Quarterly cabinet net sales increased 13% year-over-year to $777.1 million. Results were driven by continued strong demand for Fortune Brands products.
Water innovation net sales increased 4% year-over-year to $643.6 million. Results were driven by impressive performance across the business.
Outdoors & Security net sales increased 8% to $496.6 million driven by solid growth in decking, door and security product sales and a positive contribution from the LARSON acquisition.
FBHS also announced plans to split into two publicly traded companies. Fortune Brands’ existing cabinet business will be recognized as a stand-alone, publicly traded company and it will take approximately 12 months to complete the process. Additionally, FBHS has rebranded its Global Plumbing Group to Water Innovations, effective Q1 2022.
Fortune Brands Home & Security, Inc. Price, Consensus, and EPS Surprise
Fortune Brands Home & Security, Inc. price-consensus-eps-surprise-chart | Quote from Fortune Brands Home & Security, Inc.
Costs and expenses
In the first quarter, Fortune Brands’ cost of sales increased 10% year-over-year to $1,237.8 million. The measure represented 64.6% of net sales compared to 63.6% in the prior year quarter. Selling, general and administrative expenses increased 10% to $409.5 million, representing 21.4% of net sales compared to 21% a year ago.
Operating income before charges/gains decreased 5% to $249.6 million. Operating margin before charges/gains was 13%, down 180 basis points year-on-year. Interest expense increased 2% to $21.8 million.
At the end of the first quarter of 2022, Fortune Brands cash and cash equivalents were $378.2 million, down 19.8% from $471.5 million at the end of the quarter. previous. Its long-term debt increased 45.8% to $3,367.9 million sequentially.
In the first three months of 2022, net cash used in operating activities was $183.1 million, compared to $69.2 million used in the prior year quarter. Capital expenditures were $60.8 million compared to $25.4 million in the prior year quarter. In the current quarter, its free cash outflow was $235.7 million, compared to $82.3 million in the prior year quarter.
In the first three months of 2022, Fortune Brands rewarded its shareholders with a dividend payout of $37.2 million, up 3.3% year-over-year. The amount spent on the purchase of treasury stock totaled $377.1 million, up 597%.
Fortune Brands expects to benefit from the strength of its housing end market and a strong focus on product innovation in the coming quarters.
For 2022, FBHS expects sales to grow 5.5-7.5% from the prior year’s level, based on its expectation of growth in the U.S. home goods market from 4 to 6%. Earnings before charges/gains is adjusted to $6.40 to $6.60 per share from the previously published projection of $6.35 to $6.55.
For 2022, operating cash flow is expected to be between $973 and $1,108 million, while capital expenditures are expected to be between $375 and $425 million. Management expects free cash flow generation of $615 million to $700 million.
Zacks Ranking and Stocks to Consider
With a market cap of $10.1 billion, FBHS currently carries a Zacks Rank #4 (Hold).
Some top-ranked companies in the retail and wholesale industries are featured below.
AutoNation, Inc. AN sports a Zacks rank #1 (strong buy), currently. You can see today’s full list of Zacks #1 Rank stocks here.
AN’s earnings surprise over the past four quarters averaged 27.4%. Over the past 60 days, AutoNation’s earnings estimates have risen 18.2% for 2022. AN shares have gained 6.6% over the past three months.
FIGS, Inc. FIGS currently has a Zacks Rank #2 (Buy). FIGS delivered a four-quarter earnings surprise of 258.7%, on average.
Revenue estimates for FIGS have increased by 16.7% for 2022 over the past 60 days. The stock has fallen 27.7% over the past three months.
Dollar Tree, Inc. DLTR carries a Zacks rank of 2, currently. DTLR’s earnings surprise over the past four quarters averaged 11.76%.
Over the past 60 days, DTLR’s earnings estimates have risen 7.2% for 2022. The stock has risen 27.4% over the past three months.
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