Q3 Earnings Preview for Fortune Brands Home & Security (NYSE:FBHS)

in EARNINGS/INVESTING IDEAS by

Fortune Brands Home & Security, Inc. (NYSE:FBHS) is scheduled to report Q3 earnings results after markets close for trading on October 28, 2020.

The company is expected to report earnings of $1.05/share on revenue of $1.522 billion. The consensus earnings per share (EPS) of $1.05/share is based on a poll of 17 analysts and represents a growth in eps of 10.2% over the same quarter last year, when the company reported earnings of $0.95/share.

The revenue forecast of $1.522 billion based on a poll of 14 analysts implies a year-over-year (YoY) growth in revenue of 4.3%. Last year the company reported $1.459 billion in revenue for the quarter.

Expected to report EPS growth of 10.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,522.35 $1,459.00 4.3%
EPS $1.05 $0.95 10.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, missed 3 quarters, and met expectations 1 quarters.

What are your expectations from Fortune Brands Home & Security, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.60 $0.94 57.1% Beat
Q1, 2020 $0.66 $0.81 23.0% Beat
Q4, 2019 $0.97 $1 3.3% Beat
Q3, 2019 $0.98 $0.95 −2.8% Missed
Q2, 2019 $1.03 $1.03 0% Met
Q1, 2019 $0.58 $0.63 8.0% Beat
Q4, 2018 $0.94 $0.86 −8.3% Missed
Q3, 2018 $1.04 $0.93 −10.5% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 6.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 29, 2020 $72.29 $76.99 6.5% Increase
April 30, 2020 $51.53 $51.50 −0.1% Decline
January 29, 2020 $67.89 $71.01 4.6% Increase
October 23, 2019 $58.47 $60.77 3.9% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.74, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.74 implies a 0.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

Fortune Brands Home & Security, Inc. is currently trading at $87.63/share, up 0.8% for the day. The company is trading at approximately 96.4% of its 52-week high of $90.94/share. The company’s stock price is up 13.8% since the last earnings report and down −1.0% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 53.63 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:FBHS Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 27.86 and a forward P/E multiple of 22.13.

Fortune Brands Home & Security, Inc.’s current share price also implies a price-to-book (P/B) multiple of 4.92. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $87.63
P/E Ratio 27.9x
P/E Ratio (Fwd) 22.1x
PEG Ratio 3.3
Total Debt / Total Capital 16.6%
Levered Free Cash Flow $666.5 million
EV / EBITDA 15.4x

Finbox

Fortune Brands Home & Security, Inc. is a large-cap stock with a market capitalization of $12.106 billion and a total enterprise value of $14.092 billion. The company operates in the Industrials sector and the Building Products industry.

Fortune Brands Home & Security, Inc., together with its subsidiaries, provides home and security products for residential home repair, remodeling, new construction, and security applications. It operates in three segments: Cabinets, Plumbing, and Doors & Security. The Cabinets segment manufactures custom, semi-custom, and stock cabinetry, as well as vanities for the kitchen, bath, and other parts of the home directly to kitchen and bath dealers, home centers, wholesalers, and builders in North America under the Diamond, Aristokraft, Mid-Continent, Kitchen Craft, Homecrest, Omega, StarMark, Ultracraft, Kemper, Schrock, Decora, and Mantra brand names. The Plumbing segment manufactures, assembles, and sells faucets, accessories, kitchen sinks, and waste disposals in the United States, China, Canada, Mexico, Southeast Asia, Europe, and South America directly through its own sales force, as well as through independent manufacturers’ representatives primarily to wholesalers, home centers, mass merchandisers, and industrial distributors. The Doors & Security segment offers fiberglass and steel entry door systems under the Therma-Tru brand name; composite decking and railing under the Fiberon brand name; and urethane millwork under the Fypon brand name. This segment also manufactures, sources, and distributes locks, safety and security devices, and electronic security products under the Master Lock and American Lock brand names; and fire resistant safes, security containers, and commercial cabinets under the SentrySafe brand name. It serves home centers, hardware and other retailers, millwork building products and wholesale distributors, specialty dealers, and remodeling and renovation markets, as well as locksmiths, industrial and institutional users, and original equipment manufacturers. This segment sells its products in the United States, Canada, Europe, Central America, Japan, and Australia. The company was founded in 1988 and is headquartered in Deerfield, Illinois.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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