H.B. Fuller’s fourth-quarter earnings
On January 16, H.B. Fuller (FUL) announced its fourth-quarter earnings. In the fourth quarter, the company reported an adjusted EPS of $0.79—an increase of 27% over the previous year. The company reported an EBITDA margin of 15.7%—compared to 13.7% in the fourth quarter of 2017.
H.B. Fuller reported revenues of $768 million—13% growth compared to the previous year. The company’s revenue growth was mainly driven by 4% organic growth. The revenue growth was also driven by pricing, acquisition revenue, and double-digit growth in engineering adhesives.
H.B. Fuller expects the challenging macro environment to continue due to the strong US dollar and the slowdown in China. The company expects raw material prices to be stable. For 2019, H.B. Fuller expects the revenues to grow 1%–2% and the adjusted EPS to be $3.15–$3.45. H.B. Fuller will likely spend $100 million on capital expenditures in fiscal 2019.
Jim Owens, H.B. Fuller’s president and CEO, said, “In 2019 we will focus on driving solid organic revenue growth and margin improvement, achieving our committed cost and revenue synergies, and delivering $200 million of debt repayment. Engineering Adhesives will continue to grow into a larger and more profitable part of our business in 2019 and going forward.”
Stock price updates
H.B. Fuller’s strong fourth-quarter earnings helped the stock gain 1.8% and close at $45.53 for the week ending January 18. Despite the gains in the stock price, the stock traded 4.8% below its 100-day moving average price of $47.81, which indicates weakness in the stock. However, analysts appear to be bullish on the stock. Analysts have recommended a target price of $56.40, which is 23.9% higher than the closing price as of January 18.
H.B. Fuller’s 14-day relative strength index is at 61, which indicate that the stock isn’t overbought or oversold. Investors could hold H.B. Fuller indirectly by investing in the PowerShares DWA Basic Materials Momentum Portfolio (PYZ). PYZ has invested 1.60% of its portfolio in H.B. Fuller. PYZ also provides exposure to FMC (FMC), LyondellBasell (LYB), and Celanese (CE) with weights of 3.8%, 3.6%, and 3.4%, respectively, as of January 18.