Griffon Corporation GFF is well-poised for growth in the coming quarters, courtesy of strength across the Home and Building Products (HBP) segment. The company's efforts to reward its shareholders handsomely add to its appeal.

Based in New York, Griffon Corporation is a diversified holding company with exposure in several industries. The company engages in the manufacture and sale of a wide range of consumer and professional, and home and building products, including garage doors, shutters, materials for disposable diapers and disposable health care products.

GFF currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 22.7% against the industry’s 9.2% decline.

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Let’s discuss the factors that should influence investors to retain this company for the time being.

Business Strength: Griffon is witnessing strong momentum in the 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 recovering 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.

Expansion Initiatives: GFF solidifies its product portfolio and leverages business opportunities through asset additions. 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 Griffon’s CPP segment, has expanded its product portfolio in the Australian market. The acquisition of Pope is anticipated to generate annual revenues of around $25 million and positively impact the company's earnings in the first full year of ownership.

Investment in Innovation and Capacity Expansion: 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 will improve Griffon’s manufacturing efficiencies and introduce new product lines. This apart, the company 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.

Rewards to Shareholders: GFF has a strong balance sheet that has enabled it to reward its shareholders handsomely through dividend payments and share buybacks. In fiscal 2024 (ended September 2024), it paid dividends worth $35.8 million and repurchased shares for $309.9 million. In November 2024, Griffon announced that the board of directors approved a new $400,000 share repurchase authorization. Also, in November 2024, the company hiked its quarterly dividend by 20%.

Downsides of GFF Stock

Segmental Weakness: Weakness in the CPP segment raises concerns for Griffon. Reduced consumer demand in North America has been weighing on the segment's performance. Demand for products like outdoor tools, project tools and outdoor decor and watering products has been particularly weak.

Forex Woes: GFF's international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar is likely to require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry.

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Better-ranked companies are discussed below.

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In the past 60 days, the Zacks Consensus Estimate for Gates Industrial’s 2024 earnings has remained unchanged.

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