H.B. Fuller (FUL) Misses Q4 EPS by 4c, Revenues Miss; Offers FY20 EPS Guidance Below Consensus

H.B. Fuller (NYSE: FUL) reported Q4 EPS of $0.88, $0.04 worse than the analyst estimate of $0.92. Revenue for the quarter came in at $739 million versus the consensus estimate of $744.08 million.

Items of Note for Fourth Quarter 2019

• Higher full year 2019 operating cash flow of $269 million enabled debt pay down of $268 million, exceeding the company's initial 2019 paydown target of $200 million by 34%, and also exceeding its updated outlook of $260 million, as provided during its Sept. 25, 2019 analyst call;
• Integration of Royal Adhesives on target with $15 million of incremental cost synergies realized in fiscal 2019;
• Organic revenue was down 0.9% versus the fourth quarter of 2018, with improved volume trends sequentially versus the third quarter of 2019;
• Net income was $32 million or $0.61 of earnings per diluted share (EPS). Adjusted net income was $46 million1, or $0.881 adjusted EPS. Adjusted EPS decreased 2% versus the same period last year, and would have increased approximately 4% excluding unfavorable impacts from foreign currency exchange and the divestiture of the surfactants, thickeners and dispersants business;
• Completed the previously announced strategic realignment of our business into three new global business units as of Dec. 1, 2019.

"In the fourth quarter, we continued to gain share in strategic businesses including Engineering Adhesives and Hygiene, and our organic revenue trends improved sequentially compared with the third quarter," said Jim Owens, president and chief executive officer. "For the full year, adjusted EPS was within our guidance range of $2.95 to $3.05 and adjusted earnings and EBITDA improved year-over-year on a constant currency basis. These results were achieved in a weak external environment which impacted organic growth. Our cash flow conversion remained very strong as a result of solid earnings and working capital management and we significantly exceeded our debt paydown target."

GUIDANCE:

H.B. Fuller sees FY2020 EPS of $3.15-$3.35, versus the consensus of $3.50.

Items of Note for 2020 Guidance

• Adjusted diluted EPS of $3.15 to $3.35; up approximately 10% at the midpoint;
• Adjusted EBITDA of $440 to $460 million; up approximately 4% at the midpoint;
• Organic revenue growth of 1 to 2% from new business wins and share gains, even as challenging global macroeconomic conditions are assumed to continue in manufacturing sectors in 2020;
• Approximately $20 million of cost savings resulting from the company\'s business realignment drives additional earnings growth;
• Debt repayment of approximately $200 million, on-track to accelerate the company\'s 2020 deleveraging and exceed the three-year target by more than 10%.

"In 2020, we are focused on executing the growth drivers and cost savings that are enabled by our GBU realignment and the synergies provided by the Royal Adhesives acquisition," Owens said. "Our plan delivers organic growth in a continued challenging global manufacturing environment forecasted for 2020. In addition, we are reducing costs to support 10% earnings growth and increased cash flow. As a result of profit margin and working capital improvements, high cash flow conversion rates and our focused capital management programs, we remain on track to significantly exceed our committed $600 million in debt paydown by the end of 2020."

For earnings history and earnings-related data on H.B. Fuller (FUL) click here.

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