Fortune Brands(US:FBIN)2021-07-29 03:45Financial Data and Key Metrics Changes - Company sales increased by 41% in total and 32% organically, with operating margin rising by 110 basis points to 15.4% and earnings per share increasing by 66% [7][27][34] - Consolidated operating income for the quarter was $298 million, up 51% compared to the same quarter last year [27] Business Line Data and Key Metrics Changes - Plumbing sales for the second quarter were $695 million, up 38%, with an operating margin of 24.3% [28] - Outdoors and security sales increased by over 60%, with an operating margin of 14.7% [20][29] - Cabinet sales for the second quarter were $706 million, an increase of 31%, with an operating margin of 10.9% [31] Market Data and Key Metrics Changes - The U.S. housing market is expected to grow by 11% to 13%, with new construction growth projected at 11% to 14% [34] - Full-year organic sales growth is expected to be in the high teens as favorable demand trends persist [8][34] Company Strategy and Development Direction - The company is focused on accelerating margin improvement and growth initiatives through its Fortune Brands Advantage capabilities while investing for future growth [8][15] - The company aims to outperform the market, leveraging its strong positioning across all channels, including wholesale and dealer channels [10][12] Management's Comments on Operating Environment and Future Outlook - Management noted that current demand for products remains robust despite headwinds from inflation and supply chain constraints [7][15] - The long-term fundamentals for U.S. housing and home products remain favorable, with significant needs for housing and home products driven by demographic trends [10][12] Other Important Information - The company has a strong balance sheet with cash of $460 million and net debt of $2.1 billion, allowing for continued investment in growth [33] - The company has announced an additional authorization to repurchase up to $400 million of common stock [33] Q&A Session Questions and Answers Question: Can you provide more color on the back half margin outlook? - Management indicated that they are pursuing incremental actions to offset inflation, balancing cost savings with price increases, and expect to offset all inflationary headwinds this year [40][41][45] Question: What is the opportunity set for M&A across different segments? - Management stated that the pipeline for M&A is robust, focusing on areas like doors and security, and they are looking for opportunities that can create brand value and structural advantages [47][49][50] Question: Can you discuss the sustainability of plumbing margins? - Management noted that the plumbing segment had a strong second quarter, driven by FX benefits and increased brand investment, but expects margins to normalize in the back half of the year [54][55]