Fortune Brands New CEO Could Help Drive Turnaround, Truist Says in Upgrade
Fortune Brands Innovations' (FBIN) new chief executive has the potential to drive a turnaround at the company following years of weak brand-level execution and capital allocation, Truist Securities said in a note e-mailed Tuesday.On Monday, the home and building products company behind the Moen plumbing brand named Jesse Singh as CEO. Singh most recently held the same role at Azek and previously served in leadership roles at 3M (MMM) and General Electric.At Azek, Singh had done an "excellent" job leading the company's turnaround, Truist Managing Director Keith Hughes said in a note to clients. "Singh's work at Azek shows the potential to improve (Fortune Brands') best businesses (Moen, Therma-Tru) and capital allocation discipline on the others."Investors have long been unhappy with Fortune Brands' capital allocation and brand-level execution, the brokerage said, adding that Singh is well positioned to improve operational execution across the business and deploy capital "in more accretive ways than in the past."Truist upgraded its rating on the Fortune Brands stock to buy from hold, and raised the price target to $70 from $45. "We believe that (the company) can appeal to a broad array of investors in multiple categories," Hughes said.Fortune Brands shares were up 6.6% in Tuesday afternoon trade, bringing its year-to-date gains to 9.3%.Last month, the company reported a roughly 20% year-over-year drop in non-GAAP earnings per share and a 2.1% decline in sales for its fiscal first quarter.While divestitures remain a possibility for parts of Fortune Brands' portfolio, Truist expects the company to "clearly" retain its Moen-led domestic plumbing business. As much as one-third of the company's earnings before interest, taxes, depreciation, and amortization could be evaluated for structural changes aimed at improving margins and growth.Overall, renewed focus in Moen's marketing and product development could help the plumbing business regain market share, while weakness in the company's China business appears to be nearing a bottom, according to the note.Fortune Brands appointed interim CEO David Barry as chief operating officer.Price: $54.58, Change: $+3.61, Percent Change: +7.07%
