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Fortune Brands Home & Security Inc - Stock Quote FBHS

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Morningstar's Fortune Brands Home & Security Inc Stock Analysis

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Fortune Brands' Announced Spinoff Overshadows Solid First-Quarter Performance

Analyst Note

| Brian Bernard, CFA, CPA |

In a surprising move, narrow-moat Fortune Brands announced on April 28 that it intends to spin off its $2.9 billion cabinets business in a tax-free transaction. Management expects the spinoff will occur in approximately 12 months. While we weren't expecting this announcement, a similar transaction is not without precedent in the industry. We say that because Masco sold its cabinets business in early 2020 for over $850 million, or approximately 9 times EBITDA. We applauded Masco's divestiture because while its cabinets business performed quite well at times, its return on invested capital was unimpressive, and we didn't think the business had an economic moat. We share that opinion for Fortune Brands' cabinets business. Fortune Brands' remaining business will have two segments: water innovations (formerly global plumbing group), which accounts for 58% of pro forma sales (with a 23% adjusted operating margin) and outdoors and security (42% of sales and a 15% adjusted operating margin). The closest public comparison for the stand-alone $2.9 billion cabinets business (12% adjusted operating margin) is American Woodmark.

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Fortune Brands Home & Security Inc's Company Profile

Business Description

Fortune Brands Home & Security is a leading home and security products company that operates three segments. The company’s $2.9 billion (fiscal 2021) cabinets segment sells cabinets and vanities under the MasterBrand family of brands. The $2.8 billion plumbing segment, led by the Moen brand, sells faucets, showers, and other plumbing fixtures. The $2.0 billion outdoors and security segment sells entry doors under the Therma-Tru brand name, Fiberon-branded patio decking, and locks and other security devices under the Master Lock and SentrySafe brand names.

520 Lake Cook Road
Deerfield, IL, 60015-5611
T +1 847 484-4400
Sector Consumer Cyclical
Industry Furnishings, Fixtures & Appliances
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Cyclical
Employees 28,056

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