Griffon Sinks 10% Despite Sales Beat, Dividend Hike

Griffon Corp. shares dropped 10.4% in Thursday’s extended trading session even as the conglomerate reported better-than-expected revenue for the fourth quarter of FY20 (ended Sept. 30) and announced a dividend hike.

The company’s 4Q revenue grew 15.1% year-over-year to $660.7 million, surpassing analysts’ forecasts of $610.8 million. Griffon’s (GFF) top line growth was primarily driven by a 32% increase in consumer and professional products revenue of $294 million. The company attributed the performance to stronger demand for home improvement initiatives across most of the geographic regions supplemented by stay-at-home mandates and contribution from the Apta acquisition.

Indeed, revenue from home and building products rose 6% to $256.9 million supported by higher volumes and favorable mix and pricing. Defense electronics product sales were flat year-over-year at $109 million. Overall, 4Q adjusted EPS grew 10% year-over-year and was in line with analysts’ estimates. (See GFF stock analysis on TipRanks)

Separately, Griffon announced a quarterly dividend of $0.08 per share payable on Dec. 17 to shareholders of record as of the close of business on Nov. 25. The new dividend payment marks an increase of 6.7%. Griffon’s dividend yield currently stands at 1.24%.

Ahead of the earnings results, Stephens analyst Trey Grooms initiated coverage of Griffon stock with a Buy rating and a price target of $30. Grooms noted that the company’s consumer & professional products and home & building products segments are benefiting from a number of favorable demand dynamics. The analyst doesn’t expect the current tailwinds to last forever but does expect a rise in new residential construction to drive long-term sales growth.

Overall, Griffon scores a Strong Buy analyst consensus from the Street based on 3 unanimous Buys. The average analyst price target of $29.67 reflects an upside potential of 20.8% over the coming year. Shares have advanced about 21% so far in 2020.