Citi’s Will Randow believes Fortune Brands Home & Security Inc FBHS is well positioned to benefit from a recovery in the U.S. housing market.
Randow initiated coverage of the company with a Neutral rating and price target of $65.
The analyst explained that the price target represented a 4.5x premium to the current trading multiples of Fortune Brands’ peers.
“In our view, the premium is attributable to FBHS' stronger brand positioning (particularly in cabinets), investor perception of more consistent operating performance, and healthier EBITDA margins across FBHS' business portfolio,” Randow said.
However, the analyst prefers to stay on the sidelines for now, stating that the stock appeared fairly value relative to the fundamentals.
Randow also pointed out that Fortune Brands’ businesses were well positioned to benefit from a recovery in U.S. housing, since the cabinets and plumbing business “display high correlation coefficients to starts, as well as strong correlations to Existing Home Sales, private residential investment, and building permits.”
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