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H.B. Fuller: Higher Prices for Adhesives

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H.B. Fuller announced a price increase

On February 27, 2018, H.B. Fuller (FUL) announced a price increase for all of its adhesive products on March 1–April 1, 2018, or as the contract allows. The price hike will be 5%–12%. The price increase will have an impact across the globe. However, North America could see the highest price increase specifically related to water-based adhesives.

H.B. Fuller said that the price increase is mainly due to increased labor, logistics, and feedstock costs. H.B. Fuller didn’t pass on the increased raw material costs to its clients. As a result, the company’s cost of goods sold increased drastically and impacted its margins. In 4Q17, H.B. Fuller’s Americas Adhesives, Engineering Adhesives, and Royal Adhesives segments reported a combined revenue of $393.70 million, which is more than 50% of its total revenue.

The price increase could be positive for H.B. Fuller. The price increase could help improve the company’ revenue and margins, assuming that the volumes don’t drop. The impact of the price increase might be more visible in the 1Q18 earnings release.

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Stock price updates

H.B. Fuller’s stock price declined 3.8% and closed at $49.51 for the week ending March 2, 2018. The decline in the stock price caused H.B. Fuller to trade 8.50% below the 100-day moving average price of $54.11, which indicates a downward trend in the stock. However, analysts appear to be bullish on the stock. Analysts have recommended a target price of $60.00, which is 21.20% higher than closing price as of March 2, 2018. H.B. Fuller is set to gain from its acquisition of Royal Adhesives and Adecol. The price increase is positive news. The increase could strengthen H.B. Fuller’s revenue and margins.

H.B. Fuller’s 14-day relative strength index is at 41, which indicate that the stock isn’t overbought or oversold. Investors can hold H.B. Fuller indirectly by investing in the PowerShares DWA Basic Materials Momentum Portfolio (PYZ). PYZ has invested 2.60% of its portfolio in H.B. Fuller. PYZ also provides exposure to Chemours (CC), LyondellBasell (LYB), and Westlake Chemical (WLK) with weights of 4.1%, 3.8%, and 3.7%, respectively, as of March 2, 2018.

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