H.B. Fuller Company (NYSE:FUL): The One Stock To Rule Them All?

H.B. Fuller Is A Great Way To Ride Out The Reopening

If you are looking for a single stock to ride out the post-pandemic boom then H.B. Fuller Company (NYSE:FUL)  may be it. The company manufactures specialty chemicals worldwide which doesn’t sound all that exciting I know but wait until you hear what that really means. The company is a specialist in adhesives, sealants and coatings and has business with virtually every industry on the planet. The company’s adhesives alone are used in construction, industrial, and consumer applications of every kind giving it exposure to eCommerce, housing, home improvement, consumer goods, electronics (both the packaging and the product itself), health/medical, defense, aerospace, and automotive.

H.B. Fuller Beats As Rebound Accelerates

 H.B. Fuller Company was not immune from the pandemic and can not even blame the pandemic on the woe it felt early in 2020. The company’s revenue decline began in early 2019 and was only accentuated by the pandemic resulting in a near 12% decline of YOY revenue in the 2nd quarter of the year. That said, the pandemic has helped spur activity or led to a rebound in activity in every operating segment the company reports in. The fiscal 4th quarter revenue came in at $777.64 million because of it and beat the consensus estimate by a slim margin as well.

The revenue strength was driven by a 5.0% increase in organic sales. The company reports notable, double-digit improvement, in industries such as electronics, recreational vehicles, wood working, panels, packaging, tape, and labels. No surprise with any of those, demand in the RV industry was up 30% in 2020 and expected to match or outpace that rate in 2022.

Moving down the report, the company’s repositioning and restructuring efforts coupled with increasing demand to produce a lever for earnings. Cost-savings alone impacted the bottom line by $10 million or nearly 10% with cash from operations up 27%. As for the bottom line, the GAAP earnings fell short of the consensus but includes $200 million of debt repayment (not all in the 4th quarter) which exceeded the company’s original target. That said, the GAAP $0.77 missed by $0.12 but the adjusted $1.06 beat by $0.20 and is up more than 20% from last year.

Looking forward, the company is expecting a solid 2021 despite some lingering headwinds. The net revenue for fiscal 2021 is expected to rise in mid single digits with a minimum 10% EBITDA growth due to ongoing internal improvement. The company is expecting to gain market share during the global revenue which will help provide additional leverage over the coming fiscal year. The analysts were expecting a consensus in the low single digits.

H.B. Fuller: A Safe Dividend And Balance Sheet Improvement

H.B. Fuller is a Dividend King with 51 years of consecutive dividend increases in its history, and the next one is due out at the end of next quarter. Based on the outlook for earnings, the 20% payout ratio, and ongoing balance sheet improvements (the balance sheet is strong, not a fortress but getting better) investors should expect at least another 5% if not more. We’ll see. Until then, investors can rest assured the dividend is safe and sound.

The Technical Outlook: H.B. Fuller Is Ready To Move Higher

Shares of H.B. Fuller are ready to move higher but there is a caveat. While the outlook is bullish in both the near and long term there is a chance the stock will move sideways within a range over the next few weeks to several quarters. The rebound and outlook for earnings is strong, now it’s time to see some results. So, in the near-term, price action is forming a possible bottom at the $51 level but so far not able to surpass resistance at the short-term moving average. A move above the EMA would be bullish and take the stock up to $54.75 and $57. If the EMA is confirmed as resistance a move to new lows, possibly as low as $48 or $44, is the next likely scenario.