Fortune Brands Earnings: Profit Margins to Expand in 2024 as Repair and Remodel Spending Recovers

In our view, Fortune Brands Innovations’ fourth-quarter financial performance was a story of strong execution amid generally sluggish end markets. Repair and remodel spending in the United States has pulled back this year, and the Chinese market remains challenging. On the other hand, U.S. single-family construction strengthened in the second half of 2023 as homebuilders became more aggressive with sales incentives to improve affordability. Against this backdrop, Fortune Brands saw fourth-quarter organic revenue decline 3% year over year, but reported revenue increased 3%, primarily due to the acquisitions of several brands from Assa Abloy. Adjusted operating margin narrowed 150 basis points year over year to 15.8% as a 220-basis-point contraction in water segment profit margin was slightly offset by modest margin gains for the outdoors and security segments. Investments in the Moen brand and capacity expansion to support Fortune Brands’ House of Rohl product portfolio detracted from water segment profit margin this quarter, but such investments are important to support market share and pricing power.