The home improvement industry is poised for continued growth and expansion in the upcoming years, fueled by the do-it-yourself (DIY) trend and the preference for upgrading existing properties rather than purchasing new ones amid home prices increase. Also, the integration of smart home technologies is one of the key growth drivers.
Given the industry's optimistic outlook, investors could consider investing in quality home goods stocks Acuity Brands, Inc. (AYI), Alarm.com Holdings, Inc. (ALRM), and Steelcase Inc. (SCS) for steady returns.
According to a quarterly report by the Home Improvement Research Institute (HIRI), consumer project planning is expected to remain strong, with an estimated 3 in 4 homeowners planning to start home improvement projects, leading to accelerated sale of materials, equipment, and supplies among DIY homeowners planning new projects and renovation activities in 2024.
Besides, the total home improvement products market is expected to increase by 2.7% in 2024, with the consumer market growing by 3.3% while the professional market growing by 1.4%.
The United States home improvement market is expected to grow at a CAGR of 5.2% during the forecast period (2024-2032), driven by evolving homeowner preferences, technological innovations, growing DIY trends, and consumer spending behaviors.
Moreover, the increased adoption of innovative technologies has transformed the home improvement market as homeowners emphasize smart home products such as advanced HVAC systems, smart thermostats, and energy management devices. The smart homes market is expected to reach $370.95 billion by 2029, growing at a CAGR of 25.3%.
In light of these encouraging trends, let’s look at the fundamentals of the three best Home Improvement & Goods stocks, beginning with number 3.
Stock #3: Acuity Brands, Inc. (AYI)
AYI offers lighting, lighting controls, building management system, and location-aware applications. The company operates in two segments: Acuity Brands Lighting and Lighting Controls (ABL) and the Intelligent Spaces Group (ISG). It provides products under the A-Light, Aculux, eldoLED, Eureka, Gotham, Indy, IOTA, Lithonia Lighting, and Lumin brands.
On May 15, AYI’s brand Hydrel introduced the compact Tierra IGF Ingrade family. Tierra offers a higher density LED array, paired with precision optic and light shaping films to achieve a higher intensity for accent lighting and excellent uniformity with no hot spots or shadows for wall washing.
On the same day, Hydrel expanded its 4426 underwater luminaires series for fountain and water features by launching low-voltage options. It enhances Hydrel's already most varied line of underwater fixtures in the industry.
On January 30, AYI’s brand Gotham Lighting, an established innovator and manufacturer of architectural downlighting, launched IVO™ Shallow Recessed downlight, the first luminaire from the new IVO family. It addresses space limitations, fitting into spaces as shallow as 2 inches while delivering exceptional performance.
For the second quarter that ended February 29, 2024, AYI posted net sales of $905.90 million. The company's adjusted operating profit rose 6.1% from the year-ago value to $140.10 million. Its adjusted net income and EPS of $106.10 million and $3.38 indicate growth of 7.2% and 10.5% year-over-year, respectively.
Also, the company’s adjusted EBITDA increased 5.7% from the prior year’s quarter to $153 million. Its cash and cash equivalents stood at $578.90 million as of February 29, 2024, compared to $397.90 million as of August 31, 2023.
Analysts expect AYI’s revenue for the third quarter (ending May 2024) to increase 0.8% year-over-year to $1.01 billion, and its EPS for the ongoing quarter is expected to grow 7% year-over-year to $4.01. Furthermore, the company has topped the consensus EPS estimates in each of the trailing four quarters.
Shares of AYI have gained 44.7% over the past six months and 64.8% over the past year to close the last trading session at $261.87.
AYI’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AYI has an A grade for Quality. It is ranked #5 out of 58 stocks in the B-rated Home Improvement & Goods industry.
To check other POWR Ratings of AYI for Value, Momentum, Growth, Stability, and Sentiment, click here.
Stock #2: Alarm.com Holdings, Inc. (ALRM)
ALRM provides various Internet of Things (IoT) and solutions for residential, multi-family, small business, and enterprise commercial markets. It operates in two segments: Alarm.com and Other. The company provides solutions to control and monitor security systems and IoT devices, such as door locks, garage doors, thermostats, and video cameras.
On April 16, ALRM’s independent subsidiary EnergyHub and CPower Energy, the leading national Distributed Energy Resource (DER) monetization and Virtual Power Plant (VPP) provider launched a new residential Virtual Power Plant (VPP) partnership for 1.2 million Ameren Illinois customers.
The collaboration creates new opportunities for Ameren’s residential customers to earn rewards and contribute to a clean, distributed energy future, keeping the grid reliable and accelerating decarbonization.
On April 9, ALRM expanded its portfolio with the launch of proactive security capabilities with the new Sunflower Labs Autonomous Security Drone, Outdoor Floodlight Talkdown Camera, VizBlinder, and Shooter Detection Systems.
During the first quarter that ended March 31, 2024, ALRM's total revenue increased 6.5% year-over-year to $223.28 million. Its operating income grew 112.3% from the year-ago value to $18.72 million. Its non-GAAP adjusted net income attributable to common shareholders came in at $27.32 million or $0.50 per share, up 24.1% and 21.9% year-over-year, respectively.
In addition, the company’s non-GAAP adjusted EBITDA rose 21.2% year-over-year to $37.05 million. Its non-GAAP free cash flow was $46.79 million for the quarter.
Analysts expect ALRM’s revenue and EPS for the second quarter (ending June 2024) to grow 1.6% and 0.6% year-over-year to $227.39 million and $0.49, respectively. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, the stock has surged 17.1% and 33.8% over the past year to close the last trading session at $68.89.
ALRM’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
ALRM has a B grade for Growth, Value, and Stability. It is ranked #4 among 58 stocks within the same industry.
To see the other ratings of ALRM for Quality, Sentiment, and Momentum, click here.
Stock #1: Steelcase Inc. (SCS)
SCS provides a portfolio of furniture and architectural products and services internationally. It operates through Americas and International segments. Its furniture portfolio includes furniture systems, seating, storage, fixed and height-adjustable desks, benches, and tables.
SCS’ trailing-12-month gross profit margin of 32.18% is 3.4% higher than the industry average of 31.07%. Likewise, the stock’s trailing-12-month levered FCF margin of 10.01% is 52.4% higher than the industry average of 6.56%.
In terms of forward non-GAAP P/E, SCS is trading at 14.98x, 22.2% lower than the industry average of 19.25x. Likewise, the stock’s forward EV/Sales multiple of 0.57 is 68.4% lower than the industry average of 1.82. Also, its forward Price/Book of 1.69x is 38.5% lower than the industry average of 2.74x.
For the fourth quarter that ended February 23, 2024, SCS reported revenue of $775.20 million, of which its revenue from the Americas was $581.60 million. The company’s gross profit grew 1.2% from the year-ago value to $242.10 million. Its net income of $21.30 million indicates a growth of 35.7% from the prior year’s quarter.
Furthermore, the company’s adjusted EPS increased 21.1% year-over-year to $0.23.
Analysts expect SCS’ revenue and EPS for the fiscal year (ending February 2026) to grow 3.3% and 17.3% year-over-year to $3.37 billion and $1.07, respectively. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters.
Over the past month, SCS’ stock has surged 9.6% and 88.5% over the past year to close the last trading session at $13.23.
SCS’ sound fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, translating to a Strong Buy in our proprietary rating system.
SCS has an A grade for Momentum and a B for Growth, Quality, and Value. It has topped among the 58 stocks within the Home Improvement & Goods industry.
To see the other ratings of SCS for Stability and Sentiment, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
AYI shares were trading at $261.12 per share on Tuesday morning, down $0.75 (-0.29%). Year-to-date, AYI has gained 27.64%, versus a 11.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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