H.B. Fuller Has Done Well On Pricing And Margins, But Making It Last Is The Next Challenge

 

Going into 2022, I would argue that one of the biggest questions for H.B. Fuller (FUL) (“Fuller”) is whether the company can hang on to the robust pricing it achieved in the second half of the year and deliver good volume numbers against what will be some more challenging comps for the first three quarters of 2022.

I thought H.B. Fuller was both undervalued and well-leveraged to improving end-markets a year ago, but I didn’t expect quite the strength that the company showed in 2021, and the shares are around 25% higher now. That performance was well above what rival Henkel (OTCPK:HENKY) managed, though not quite as strong as Arkema (OTCPK:ARKAY), and more or less in line with the very well-regarded Sika (OTCPK:SXYAY).

At this point I still have my doubts about Fuller – the company’s long-term margin performance hasn’t been that strong, and I’ve had my doubts that the company can really differentiate its products in the market. If they can hold the line on pricing, that’s a strong argument in their favor. I still see Fuller as potentially undervalued if it can deliver improved margins (on top of long-term revenue growth of around 5%), but that’s not a small “if” for the company.

 

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H.B. Fuller Has Done Well On Pricing And Margins, But Making It Last Is The Next Challenge