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Why Shares of Resideo Technologies Are Soaring Today

By Lou Whiteman - Updated Feb 27, 2020 at 3:59PM

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Fourth-quarter results came in better than expected.

What happened

Shares of Resideo Technologies (REZI -0.97%) traded up more than 23% on Thursday after the company reported better-than-expected fourth-quarter results and detailed a cost-savings plan.

So what

Resideo, a maker of smart home and security products, which was spun off from Honeywell International in 2018, reported fourth-quarter adjusted earnings of $0.39 per share on revenue of $1.3 billion, beating analyst expectations of $0.28 per share in earnings on sales of $1.28 billion. The results were a rare bit of good news for Resideo, which has seen its shares fall 63% since the Honeywell spinoff.

In October, the company cut guidance and said it was initiating a comprehensive operational and financial review because the transition to the company's new generation of security products and connected thermostats will take longer than expected.

A woman setting the burglar alarm at her house.

Image source: Getty Images.

In a statement, CEO Mike Nefkens said that the fourth-quarter results were driven by better execution and strength in its distribution business. "While our full-year 2019 results were impacted by a number of challenges in our Products & Solutions business, we are taking proactive steps to drive improved performance," Nefkens said.

The company also detailed the results of the review announced last fall. Resideo said it has identified a number of areas for cost reductions and expects to deliver $30 million to $40 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improvements in 2020, and $80 million to $120 million in 2021.

Now what

Resideo expects to generate full-year 2020 revenue growth of 2% to 4% and full-year adjusted EBITDA of between $420 million and $450 million. That's compared to net revenue of $5 billion and adjusted EBITDA of $362 million in 2019.

It's been a tough road for Resideo as an independent, and it's going to take time for the company to win back investor trust. But if Thursday's stock reaction is any indication, fourth-quarter results are a big step in the right direction.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Resideo Technologies, Inc. Stock Quote
Resideo Technologies, Inc.
REZI
$23.50 (-0.97%) $0.23

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