H.B. Fuller has announced that it has signed a distribution agreement with Jubilant Agri and Consumer Products Limited, or JACPL, a 100% subsidiary of Jubilant Industries, to address the growing demand for adhesive applications in the B2B woodworking segment. Headquartered in greater Noida, India, and encompassing three major businesses, JACPL will now serve as a national channel partner of H.B. Fuller. The company said this strategic collaboration will help expand the reach of H.B. Fuller's high-performing adhesive solutions through a wide range of technologies, including water-based, hot melt moisture cures, and polyurethanes to better meet customers' specific adhesion and sustainability requirements, while also offering access to global specialists and local expertise, service and technical support.
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. BlackBerry (BB) downgraded to Reduce from Hold at TD Securities, downgraded to Underperformer from Neutral at CIBC and downgraded to Sell from Hold at Canaccord. 2. H.B. Fuller (FUL) downgraded to Neutral from Buy at Citi with analyst Eric Petrie citing the "near-term price lag" to raw material costs and expected low EBITDA growth in the second half of 2021 for the downgrade. 3. Rite Aid (RAD) downgraded to Underweight from Neutral at JPMorgan with analyst Lisa Gill saying while the company's adjusted EBITDA in Q1 came in above consensus on vaccine tailwinds, that tailwind is now subsiding, and the initial fiscal 2022 adjusted EBITDA guidance came in well below expectations. 4. New Jersey Resources (NJR) downgraded to Underperform from Neutral at BofA with analyst Julien Dumoulin-Smith contending that the NJNG petition to increase base rates by a "steep" 25% will prove "difficult" while also highlighting "uncertain" execution at Clean Energy Ventures due to limited management track record. 5. APA Corp. (APA) downgraded to Neutral from Overweight at JPMorgan with analyst Arun Jayaram continuing to like the story long-term, but expects the shares to trade more in-line with the group through year-end as the market awaits appraisal results in Suriname as well as the ratification of new production sharing contract terms in Egypt. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
Deutsche Bank analyst David Begleiter raised the firm's price target on H.B. Fuller to $67 from $65 and keeps a Hold rating on the shares post the fiscal Q2 results. While EBITDA was modestly above expectations and sales growth guidance exceeded expectations, the implied Q3 EBITDA guidance was 8% below consensus and he implied Q4 EBITDA guidance was wider than usual, Begleiter tells investors in a research note.
Citi analyst Eric Petrie downgraded H.B. Fuller to Neutral from Buy with a price target of $68, down from $71. The analyst cites the "near-term price lag" to raw material costs and expected low EBITDA growth in the second half of 2021 for the downgrade. He reduced estimates through fiscal 2023 due to lower margins and is now are on the low end of management's 2021 EBITDA guidance. H.B. Fuller's long-term story is attractive, but investors should look for a better entry point, Petrie tells investors in a research note.
The company expects raw material cost increases to exceed 10% on a full year basis versus 2020, with the most significant margin head winds expected in the third quarter. The company has implemented annualized price adjustments of $150 million effective March 1 through July 15 and is planning additional increases of $75 million in August and September to offset higher raw material costs. The company is prepared to implement further increases as necessary. Given these assumptions, the company's prior outlook for full year adjusted EBITDA in the range of $455 million to $475 million remains unchanged. This reflects adjusted EBTIDA growth of 12% to 17% versus 2020, which is supported by share gains, on-going recovery in global industrial production, pricing actions balancing higher input costs, and benefits from the company's operational improvement projects.
Reports Q2 revenue $828M, consensus $764.37M. "H.B. Fuller did an outstanding job supporting customers during the quarter, and we delivered another quarter of strong sales and earnings growth," said Jim Owens, H.B. Fuller president and chief executive officer. "Despite considerable raw material and packaging shortages, H.B. Fuller was able to meet a sizeable increase in demand by leveraging our extensive global network and partnering with customers and suppliers. Raw material costs increased substantially in the second quarter, exacerbated by shortages and impacts from Storm Uri earlier this year. We have implemented significant price adjustments and delivered efficiencies through our streamlined global business unit structure and operational excellence programs. These actions are enabling us to seamlessly serve our customers, achieve our profit targets, and increase our debt paydown over last year's level, in line with our target for $200 million of debt reduction in 2021. Our effective sourcing strategies, market-driven innovation and operational agility are supporting H.B. Fuller's profitable business growth in the current supply-constrained environment. We continue to demonstrate the resiliency of our business, and our ability to grow, gain share and deliver value for shareholders."
Pre-earnings options volume in H B Fuller is normal with calls leading puts 19:7. Implied volatility suggests the market is anticipating a move near 5.3%, or $3.51, after results are released. Median move over the past eight quarters is 2.5%.
H.B. Fuller announced that its board of directors declared a regular quarterly cash dividend of 16.75c per share of common stock. The dividend is payable on May 6 to shareholders of record at the close of business on April 22. This represents a 3% increase over the prior quarterly dividend, the company noted.