Strong Third Quarter Propels Resideo Stock Price

Resideo, which trades on the New York Stock Exchange (NYSE) under the acronym REZI, saw its stock price increase by more than 40% during market trading on November 5, 2020. The substantial price boost occurred thanks to an excellent third quarter (Q3) that greatly exceeded expectations.

In the company's most recent earnings report, Resideo stated that it had achieved roughly $1.36 billion in revenue for Q3. This is much higher than the consensus estimate of $1.15 billion. Resideo has enjoyed a 10% increase in revenue year over year. The company says that it expects Q4 revenue to be between $1.36 billion and $1.41 billion.

Thanks to this positive news, REZI opened Thursday at $14.20 after closing at just $11.35 the day prior. REZI enjoyed further increases throughout most of Thursday trading, as the stock price soon rose above $15. The price stayed in the $15 range during most of the day, though it did exceed the $16 threshold at times.

Resideo President and CEO Jay Geldmacher said in a recent press release, "Our revenue performance and the progress with our ongoing transformation and cost reduction initiatives enabled us to strengthen our liquidity position, and in late October we made all outstanding reimbursement agreement payments to Honeywell... While we are closely monitoring our operations and supply chain for impacts related to the COVID-19 pandemic, we are encouraged by the strong demand trends we are seeing across our end markets as we close out 2020.”

The reimbursement agreement payments that Geldmacher is referring to come from an agreement between Honeywell and Resideo after Resideo was spun-off from Honeywell in late 2018. At the end of October 2020, Resideo paid Honeywell $35 million for a payment that was deferred on April 30, 2020, as well as an additional $35 million for a regularly scheduled payment.

Resideo also mentioned some highlights in its earnings report. Their ADI Global Distribution segment saw an 11% revenue increase to $790 million. Their Products & Solutions segment enjoyed a 12% revenue increse to $572 million. Their gross margin rate increased by 200 basis points (BPS) to 27.2%. Operating income for the company is up 122% year over year, with net income up 838% year over year, and diluted earnings per share (EPS) up 900% year over year. And their adjusted EBITDA increased by 65% to $188 million.

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