Demand for home improvement products and services increased during the COVID-19 pandemic, with people spending more time in their homes. With people becoming homebound and continuing their hybrid lifestyles, demand remained stable even after the restrictions were eased.
Nearly 76% of American homeowners did a home improvement project in 2020. Last year, Americans spent approximately $538 billion at home improvement stores. This trend is projected to continue in the upcoming years, driven by rapid urbanization, a growing transition toward energy-efficient living spaces, and the continuation of hybrid working models across various organizations.
Furthermore, easing inflation data for October is expected to bode well for the industry. According to a report by Allied Market Research, the home improvement services market is expected to reach $585.30 billion by 2030, growing at a CAGR of 6.2%.
Given the backdrop, adding fundamentally strong home improvement stocks The Sherwin-Williams Company (SHW), La-Z-Boy Incorporated (LZB), and Bassett Furniture Industries, Incorporated (BSET) to your portfolio could be wise.
The Sherwin-Williams Company (SHW)
SHW develops, distributes, and sells paints, coatings, and related products to professional, industrial, commercial, and retail customers. It works through three segments: The Americas Bunch; Consumer Brands Group; and Performance Coatings Group.
On November 8, 2022, SHW announced a deal to acquire Specialized Industrial Coatings Holding (SIC Holding), a venture of Peter Möhrle Holding and GP Capital UG that includes Oskar Nolte GmbH and Klumpp Coatings GmbH. Through this acquisition, SHW will have the chance to grow profitably in the international industrial wood market.
Additionally, the company will gain from the excellent technical and commercial teams at Oskar Nolte and Klumpp Coatings and their connections to local and international clients, all of which SHW can further exploit across Europe and beyond.
On November 11, SHW announced the acquisition of Industria Chimica Adriatica S.p.A. (ICA), an Italian designer, manufacturer, and distributor of industrial wood coatings used for kitchen cabinets, furniture and décor, building products, flooring, and other specialty applications.
In addition to having cutting-edge waterborne and solvent liquid coatings technology, ICA has several product specifications and approval positions, strategically positioned manufacturing, and solid technical ties with local and international clients. With this cooperation, SHW might quicken lucrative expansion in the area and outside.
SHW’s net sales increased 17.5% year-over-year to $6.05 billion in the fiscal 2022 third quarter ended September 30, 2022. Its gross profit grew 21% year-over-year to $2.59 billion. Its adjusted EBITDA came in at $1.12 billion, up 34.8% year-over-year.
Furthermore, the company’s net income and net income per share grew 36.4% and 39.4% year-over-year to $685.10 million and $2.62, respectively.
The company’s Board of Directors declared a regular quarterly dividend of $0.60 per common share to shareholders of record on November 18, 2022, payable on December 2, 2022. The company has increased its dividend for 44 consecutive years. Its dividend payouts have grown at a 16.2% CAGR over the past five years, and the current dividend yields 1%.
Analysts expect SHW’s revenue to increase 11.1% year-over-year to $22.16 billion in fiscal 2022. The company’s EPS for the current fiscal year is expected to increase 6.9% year-over-year to $8.71. Over the past month, the stock has gained 15.8% to close the last trading session at $243.45.
SHW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth and Quality. Within the Home Improvement & Goods industry, it is ranked #11 among 60 stocks.
Beyond what we stated above, we also have SHW’s ratings for Value, Sentiment, Stability, and Momentum. Get all SHW ratings here.
La-Z-Boy Incorporated (LZB)
LZB produces, markets, imports, exports, distributes, and retails accessories and case goods furniture products in the United States, Canada, and internationally. The company operates through Wholesale; Retail; Corporate; and Other segments.
On August 23, Melinda D. Whittington, LZB’s President and Chief Executive Officer said, “We delivered excellent results for the quarter amidst challenging trends for the global economy and the furniture industry. We are focused on navigating the near-term volatile environment with agility while strengthening our business for the long term with our Century Vision strategy.”
“This quarter, we further built our iconic La-Z-Boy brand with the acquisition of five La-Z-Boy Furniture Galleries® stores in the Denver market and our Joybird brand with the opening of two new Joybird retail stores,” he added.
LZB’s sales increased 15.1% year-over-year to $604.09 million in the fiscal 2023 first quarter ended July 30, 2022. Its non-GAAP operating income increased 55.4% year-over-year to $53.82 million. Non-GAAP net income attributable to LZB grew 58.4% from the prior-year period to $39.42 million, while non-GAAP EPS came in at $0.91, up 65.5% year-over-year.
LZB pays a $0.66 per share dividend annually, which translates to a 2.57% yield on the current price. Its dividend payouts have grown at a CAGR of 8.5% over the past five years.
Analysts expect LZB’s revenue to increase 0.7% year-over-year to $2.37 billion in the fiscal year ending April 2023. The company’s EPS for the ongoing year is expected to increase 6% year-over-year to $3.30. It has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 12.32% over the past month and 10.5% over the past six months to close the last trading session at $26.20.
LZB’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has a B grade for Value and Quality. Within the Home Improvement & Goods industry, it is ranked #6 among 60 stocks.
Beyond what we stated above, we also have LZB’s ratings for Growth, Stability, Sentiment, and Momentum. Get all LZB ratings here.
Bassett Furniture Industries, Incorporated (BSET)
BSET develops, manufactures, sources, sells, and distributes home furnishings internationally. It operates in three segments: Wholesale; Retail company-owned stores; and Logistical services. The company operates a network of more than 63 company-owned and 34 licensee-owned stores.
On September 6, the company acquired the capital stock of Noa Home Inc., a mid-priced e-commerce furniture retailer based in Montreal, Canada. Noa operates in Canada, Australia, Singapore, and the United Kingdom and has had net revenues of C$2 million ($1.49 million) for its most recent fiscal year.
The acquisition might give BSET a stronger online presence and allow the company to attract more digitally native customers.
For the third quarter of fiscal 2022 ended August 27, 2022, BSET’s net sales of furniture and accessories increased 12.5% year-over-year to $118.01 million, and its gross profit grew 15.5% year-over-year to $60.77 million. The company’s income from operations was $10.67 million, up 114.5% year-over-year.
In addition, the company’s net income and EPS increased 152.9% and 164.5% year-over-year to $7.63 million and $0.82, respectively.
BSET’s annual dividend of $0.64 per share yields 3.34% on the current price. Its four-year dividend yield is 5.35%. The company’s dividend payments have grown at a 6.3% CAGR over the past three years and a 7.4% CAGR over the past five years.
Analysts expect BSET’s EPS for the current fiscal year (ending November 2022) to increase 23% from the previous year to $2.27. Moreover, the company has surpassed the consensus EPS in three of the trailing four quarters.
Over the past month, the stock has gained 14.45% to close the last trading session at $19.13.
BSET’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and Sentiment and a B for Value. Within the Home Improvement & Goods industry, it is ranked #3 among 60 stocks.
Click here to see additional ratings of BSET for Growth, Momentum, and Stability.
SHW shares were trading at $249.33 per share on Wednesday afternoon, up $5.88 (+2.42%). Year-to-date, SHW has declined -28.52%, versus a -14.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More…