Home renovation retailers have enjoyed massive gains over the last two years amid the home improvement and remodeling frenzy, with people spending more time at home and work-from-home structures gaining traction. People invested significantly in improving everything from new home offices to basement gyms. Although analysts project a slowdown in the home improvement craze this year, spending on house remodeling is expected to reach $430 billion in the latter half of 2022, reflecting a 20% increase from the same period last year. Furthermore, record high housing prices have caused many people to opt for remodeling rather than buying a new house.
Rising disposable income, rapid urbanization, changing trends, and an increased inclination towards energy-efficient living spaces are major factors contributing to the industry’s growth. The global home improvement market is expected to grow at a 6.4% CAGR to $514.90 billion by 2028.
Given the industry’s solid prospects, we think home improvement stocks Snap-on Incorporated (SNA), Builders FirstSource, Inc. (BLDR), Acuity Brands, Inc. (AYI), Kingfisher plc (KGFHY), and HNI Corporation (HNI) could be ideal additions to one’s portfolio now.
Snap-on Incorporated (SNA)
SNA in Kenosha, Wisc., is a manufacturer and marketer of tools, equipment, diagnostics, repair information, and systems solutions. Its segments include the Commercial and Industrial Group; Snap-on Tools Group; and Repair Systems and Information Group.
On April 28, SNA declared a quarterly dividend of $1.42 per share payable on June 10, 2022.
SNA’s net sales increased 7.1% from the prior-year quarter to $1.10 billion in its fiscal first quarter, ended April 2, 2022. Its gross profit for the quarter was $534.30 million, reflecting a 4% increase year-over-year, while its operating earnings stood at $293.50 million, up 10.3% year-over-year. Its EPS has increased 14.3% from the prior-year quarter to $4.
The $3.93 consensus EPS estimate for its fiscal second quarter, ending June 30, 2022, represents a 4.5% improvement year-over-year. The $1.09 billion consensus revenue estimate for the quarter represents a 0.9% increase from the same period last year. It has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
The stock has gained 5.2% in price over the past month to close the last trading session at $214.22.
SNA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. SNA has an A grade in Quality and a B in Stability. It is ranked #3 of 64 stocks in the Home Improvement & Goods industry.
Beyond what is stated above, we have also rated SNA for Momentum, Value, Sentiment, and Growth. Get all the SNA ratings here.
Builders FirstSource, Inc. (BLDR)
BLDR in Dallas, Tex., manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers in the United States.
In February, BLDR announced its plans to repurchase $1 billion of its common shares. A total of 30.60 million shares of common stock were previously repurchased at an aggregate cost of $2 billion. This transaction was authorized in August and November last year. “The completion of our prior share repurchase plans and our new repurchase authorization announced today are a direct reflection of the financial strength of our company, our ability to deploy our robust free cash flow to drive profitable growth, and our commitment to shareholder value creation,” said Dave Flitman, President and CEO of Builders FirstSource.
BLDR’s net sales increased 83.1% year-over-year to $4.63 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its income from operations grew 190.7% from its year-ago value to $621.79 million, while its net income improved 216.2% year-over-year to $442.46 million. Its net EPS increased 95.8% from its year-ago value to $2.31.
Analysts expect BLDR’s revenue for the fiscal quarter ended March 31, 2022, to be $4.69 billion, indicating a 12.3% increase year-over-year. Also, the company’s EPS is expected to grow 83.6% year-over-year to $2.02 in the same period. BLDR also beat the consensus EPS estimates in the trailing four quarters.
BLDR stock has gained 30% in price over the past year and 42.4% over the past nine months to close the last trading session at $63.28.
It is no surprise that BLDR has an overall B rating, which equates to Buy in our POWR Ratings system. BLDR has an A grade in Growth and a B in Value, Momentum, and Quality. In the Home Improvement & Goods industry, BLDR is ranked #6.
In addition to the POWR Rating grades I have just highlighted, you can see the BLDR’s ratings for Stability and Sentiment here.
Acuity Brands, Inc. (AYI)
AYI in Atlanta, Ga., provides lighting and building management solutions in North America and internationally. The company operates through two segments–Acuity Brands Lighting and Lighting Controls (ABL); and the Intelligent Spaces Group (ISG).
On February 3, AYI announced the installation of digital QR codes, reducing paper use by more than 15 million sheets, saving about 1,500 trees per year, and reducing CO2 emissions by approximately 423,000 pounds per year. This move is aligned with the company’s sustainability goals.
AYI’s net sales increased 17.1% year-over-year to $909.10 million in its fiscal quarter ended Feb. 28, 2022. Its gross profit improved 12.7% year-over-year to $379.30 million over the period. Its net income for the quarter came in at $75.30 million, up 19.7% year-over-year, while its EPS increased 22.4% from its year-ago value to $2.13.
The Street expects AYI’s EPS for its fiscal quarter, ending May 31, 2022, to improve 4.3% year-over-year to $2.89. The $980.84 million consensus revenue estimate for the same period represents a 9% increase year-over-year. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
AYI shares have gained marginally over the past nine months to close yesterday’s trading session at $173.13.
AYI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The company also has an A grade in Quality and a B in Value. The stock is ranked #1 in the Home Improvement & Goods industry. To get AYI’s ratings for Growth, Momentum, Stability, and Sentiment, click here.
Kingfisher plc (KGFHY)
Headquartered in London, KGFHY supplies home improvement products and services through retail stores and other channels. Its segments include the United Kingdom (UK) & Ireland; France; Poland; and Other International.
In March 2022, B&Q, a wholly-owned subsidiary of KGFHY, announced the launch of a new online home improvement marketplace. B&Q enhancing its e-commerce platform, is expected to “create a scalable model for Kingfisher to roll out marketplaces in other markets and banners.”
For its fiscal year ended 2021, KGFHY’s sales increased 6.8% year-over-year to £13.18 billion ($13.86 billion). Its gross profit grew 7.9% from its year-ago value to £4.94 billion ($5.20 billion), while its retail profit stood at £1.15 billion ($1.21 billion), reflecting a 14.5% increase year-over-year. Furthermore, its EPS was £35.2p, up 22.6% from its year-ago value.
KGFHY’s revenue for its fiscal year ending Jan. 31, 2023, is expected to come in at $15.76 billion, while its EPS is expected to be $0.68.
KGFHY’s shares slumped 1.1% in price intraday to close the last trading session at $6.19.
The company has an overall B rating, which translates to Buy in our proprietary ratings system. KGFHY is rated A in Value and B in Quality and Stability. Within the Home Improvement & Goods industry, it is ranked #15.
Click here to see additional POWR Ratings for Growth, Momentum, and Sentiment for KGFHY.
HNI Corporation (HNI)
HNI manufactures and sells workplace furnishings and residential building products primarily in the United States. The Muscatine, Iowa-based company operates through two segments: Workplace Furnishings; and Residential Building Products.
HNI’s net sales increased 18.2% year-over-year to $572.33 million in its fiscal first quarter, ended April 2, 2022. Its gross profit grew 9.4% from the year-ago value to $196.91 million. The company’s net cash flows from financing activities increased 1,073% year-over-year to $30.32 million over the period.
The $2.71 consensus EPS estimate for the fiscal year ending December 31, 2022, represents a 66.1% improvement year-over-year. The $2.61 billion consensus revenue estimate for the same quarter represents a 19.6% increase from the same period last year. It topped the Street’s EPS estimates in each of the trailing four quarters.
HNI’s stock has declined marginally in price over the past month to close the last trading session at $35.48.
HNI’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
HNI is also rated B in Sentiment. It is ranked #10 in the Home Improvement & Goods industry. To see additional POWR Ratings for Growth, Quality, Value, Momentum, and Stability for HNI, click here.
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SNA shares were trading at $219.42 per share on Tuesday morning, up $5.20 (+2.43%). Year-to-date, SNA has gained 2.55%, versus a -11.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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