Griffon Stock Exhibits Strong Prospects Despite Headwinds

Griffon Corporation GFF is witnessing strong momentum in the Home and Building Products (HBP) segment. Increased demand for residential products, supported by the resiliency of repair and remodeling activity in the residential construction market, is driving the segment’s results. The U.S. residential construction market is seeing a recovery in single-family housing, supported by lower interest rates and builder incentives, which is likely to be beneficial for the segment in the quarters ahead. The recovery in the commercial construction market, driven by several projects undertaken by customers, is expected to benefit the segment.Griffon has been strengthening its business through acquisitions. In July 2024, it acquired an Australia-based company, Pope (a provider of residential watering products), through its subsidiary, The AMES Companies, Inc., (“AMES”). Pope, which has been added to the Consumer and Professional Products (CPP) segment, has expanded the company’s product portfolio in the Australian market. The acquisition of Pope is anticipated to generate annual revenues of around $25 million and positively impact earnings in the first full year of ownership. Griffon acquired Hunter, a provider of residential ceiling, commercial and industrial fans, in January 2022. Hunter, which has been integrated into the CPP segment, has expanded the company’s portfolio of consumer products.Griffon continues to invest in productivity, innovation and capacity expansion to further drive growth. For instance, in 2023, the company expanded Clopay's Troy manufacturing facility, which improved its manufacturing efficiencies and introduced new product lines. This apart, it also expanded the sectional door manufacturing capacity in Ohio to cater to increasing demand for its premium products. These projects signify a significant investment in the expansion and modernization of the company’s key manufacturing and distribution facilities. Griffon plans to make additional investments in capacity expansion and technology in 2025.In the past year, this Zacks Rank #3 (Hold) company’s shares have gained 56% against the industry’s 6.5% decline.Image Source: Zacks Investment ResearchDownsides of GFFWeakness in the CPP segment raises concerns for Griffon. Reduced consumer demand in North America has been weighing on the segment's performance. The CPP segment’s revenues declined 6% year over year in fiscal 2024. Demand for products like outdoor tools, project tools and outdoor decor and watering products has been particularly weak. Though the company anticipates a healthy demand environment in Australia, weakness in North America is expected to persist through the first half of fiscal 2025.Griffon operates across diverse regions (United States, Europe, Canada and Australia), which exposes it to certain political, environmental and geopolitical issues. Moreover, it remains vulnerable to currency translation risks, which may affect its performance in the quarters ahead. A stronger U.S. dollar may depress the company's overseas business results in the near term.Stocks to ConsiderBetter-ranked companies are discussed below.Federal Signal Corporation FSS presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.FSS delivered a trailing four-quarter average earnings surprise of 11.8%. In the past 60 days, the Zacks Consensus Estimate for Federal Signal’s 2024 earnings has increased 3.1%.Zurn Elkay Water Solutions Corporation ZWS presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 8.5%.In the past 60 days, the Zacks Consensus Estimate for ZWS’ 2024 earnings has increased 2.5%.Kadant Inc. KAI presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 17.2%. The Zacks Consensus Estimate for KAI’s 2024 earnings has increased 1.8% in the past 60 days.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. 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