The rising demand for customization, accelerated urbanization, and the widespread popularity of the D-I-Y (Do it Yourself) concept are boosting the home improvement market. So, investors could buy quality home improvement stocks Kingfisher plc (KGFHY), Acuity Brands, Inc. (AYI), and Alarm.com Holdings, Inc. (ALRM).
As 2023 concluded, consumers exhibited a notable surge in confidence, with optimism restored for the upcoming year. The Conference Board Consumer Confidence Index rose to 110.7 in December, marking an increase from the downwardly revised 101 recorded in November, suggesting a positive outlook among consumers.
Higher consumer confidence generally bodes well for sectors like home improvement, where consumer spending plays a crucial role in driving growth. Besides, this could also lead to an uptick in demand for products and services as homeowners become more inclined to invest in renovating or upgrading their homes.
Additionally, the home improvement market is poised for growth due to the rising demand for smart home products and the increasing popularity of outdoor living spaces. Moreover, transformative technological trends like 3D printing, Internet of Things (IoT) devices, robotics, and virtual/augmented reality are reshaping the landscape of the home improvement industry.
Moreover, the popularity of DIY projects is on the rise, with a heightened focus on DIY home improvement projects for personalized interior design bolstering the DIY home improvement sector. The U.S. DIY home improvement market is expected to grow at a CAGR of 4.7% until 2027.
On top of it, the home improvement industry, like many others, continues to experience a surge in online sales. Consumers are increasingly turning to online platforms to purchase home improvement products, and companies are investing in improving their digital presence.
In light of these encouraging trends, let's look at the fundamentals of the three best B-rated Home Improvements & Goods stocks, beginning with number 3.
Stock #3: Kingfisher plc (KGFHY)
Headquartered in London, the United Kingdom, KGFHY supplies home improvement products and services through its stores and e-commerce channels internationally. The company operates retail stores under the B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint, and Koçtas brands.
On December 7, 2023, KGFHY expanded its partnership with CitrusAd, a part of global advertising and marketing technology company Epsilon, which is a recognized leader in retail media, to introduce retail media opportunities for third-party brands across its banners.
The collaboration, initially launched with B&Q, will extend to all Kingfisher banners in six additional European countries. This expansion allows brands to connect with millions of customers through KGFHY's popular e-commerce platforms.
The company pays $0.31 annually, which yields 3.35% on the current market prices.
During the six-month period, which ended on July 31, 2023, KGFHY’s sales and gross profit increased marginally year-over-year to £6.88 billion ($8.75 billion) and £2.49 billion ($3.17 billion), respectively. Moreover, the company’s profit for the period and EPS amounted to £237 million ($301.25 million) and 12.2 pence, respectively.
Street expects KGFHY’s revenue for the fiscal year ending January 2024 to increase 3.2% year-over-year to $16.47 billion. Its EPS for the same year is expected to come in at $0.56.
The stock has gained 16.8% over the past three months to close the last trading session at $5.63.
KGFHY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
It also has an A grade for Value and a B for Growth and Stability. In the 57-stock B-rated Home Improvement & Goods industry, it is ranked #13.
In addition to the POWR Ratings we’ve stated above, one can access KGFHY Momentum, Sentiment, and Quality ratings here.
Stock #2: Acuity Brands, Inc. (AYI)
AYI provides lighting and building management solutions through Acuity Brands Lighting and Lighting Controls (ABL) and the Intelligent Spaces Group (ISG) segments. Its offerings include commercial, architectural, and specialty lighting solutions. In addition, it also provides a building management platform and location-aware applications under the Distech Controls and Atrius brands.
The company’s annual dividend of $0.52 translates to a 0.23% yield on current prices, while its four-year average dividend yield is 0.36%. It has raised its dividend payouts at a CAGR of 5.9% over the past five years.
During the first quarter, the company repurchased approximately 0.30 million shares of common stock for a total of approximately $50 million.
AYI’s net sales amounted to $934.70 million for the fiscal first quarter (ended November 30, 2023). Its gross profit rose 2.9% from the year-ago quarter to $428.40 million. The company’s adjusted net income improved 8.7% and 40.2% year-over-year to $116.80 million and 3.21 per share.
AYI’s revenue and EPS are expected to grow 2.5% and 3% year-over-year to $1.04 billion and $4.07 in the fiscal fourth quarter ending August 2024. Moreover, the company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 47.6% over the past nine months and 39.1% over the past three months to close the last trading session at $232.27.
AYI’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Sentiment. Within the same industry, it is ranked #6.
Click here to see AYI’s ratings for Growth, Momentum, Stability, and Sentiment.
Stock #1: Alarm.com Holdings, Inc. (ALRM)
ALRM offers various technology solutions for residential, multi-family, small business, and enterprise commercial markets internationally. It operates in segments: Alarm.com and Other. The company provides solutions to control and monitor security systems and IoT devices, including door locks, garage doors, thermostats, and video cameras.
On December 29, ALRM and Vivint announced that they had resolved all outstanding litigation and established a long-term intellectual property license agreement. ALRM will license its intellectual property portfolio to Vivint as part of the resolution.
In the third quarter ended on September 30, 2023, ALRM’s net revenue grew 2.6% year-over-year to $221.85 million. Its SaaS and license revenue increased 8.9% year-over-year to $133.10 million. The company’s net income came in at $19.35 million or $0.37 per share, up 6.8% and 5.7% from the prior year’s quarter, respectively.
Also, the company’s adjusted EBITDA increased 1.5% from the year-ago value to $41.43 million.
Analysts project ALRM’s revenue and EPS for the first quarter (ending March 2024) to increase 6.8% and 10.2% year-over-year to $223.93 million and $0.47, respectively. Also, the company has topped the consensus EPS estimate in all four trailing quarters, which is remarkable.
Shares of ALRM have surged 29.6% over the past nine months and 13.1% over the three months to close the last trading session at $62.53.
ALRM’s POWR Ratings reflect its robust fundamentals. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
ALRM has a B grade for Sentiment, Value, Stability, and Quality. It is ranked #4 in the same industry.
Beyond the POWR Ratings we’ve stated above, we also have ALRM ratings for Growth and Momentum. Get all ALRM ratings here.
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AYI shares were trading at $230.77 per share on Tuesday morning, down $1.50 (-0.65%). Year-to-date, AYI has gained 12.66%, versus a 1.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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