06. Resideo Technologies, Inc. (NYSE:REZI)
Number of Hedge Fund Holders: 33
Resideo Technologies, Inc. (NYSE:REZI) is a prominent player in the industrial distribution sector. The company’s global reach and diversified portfolio position it well within the distribution space, particularly through its ADI Global Distribution segment, which focuses on security, fire, access control, and smart home products. Furthermore, Resideo operates across two key segments: Products & Solutions and ADI Global Distribution, which cater to both commercial and residential markets, adding resilience to its business model.
In Q2 2024, Resideo Technologies, Inc. (NYSE:REZI) reported robust financial metrics, highlighting its strong fundamentals. Adjusted EBITDA surged to $175 million, exceeding expectations and representing significant growth from Q2 2023. This growth was driven by a 460 basis point improvement in the Products & Solutions segment, where gross margins climbed to 41%, showcasing strong operational efficiency. Resideo’s adjusted EBITDA margin of 24.8% further underscores the company’s ability to manage costs effectively, even in a challenging macroeconomic environment.
One of the standout developments for Resideo Technologies, Inc. (NYSE:REZI) in the quarter was the acquisition of Snap One, which expands its presence in the audiovisual and smart living markets. The integration is expected to yield $75 million in annual run-rate synergies by 2026, with $12 million expected in 2024 alone. This acquisition enhances Resideo’s product offerings and strengthens its distribution network, positioning the company for continued growth in the coming years.
Hedge fund interest in Resideo Technologies, Inc. (NYSE:REZI) has also increased, with 33 hedge funds holding stakes in the company as of Q2 2024, up from 26 in the previous quarter. This reflects growing confidence in Resideo Technologies, Inc. (NYSE:REZI) future performance, driven by its operational improvements and strategic acquisitions. Additionally, the company generated $77 million in free cash flow during the quarter, further enhancing its financial flexibility to pursue growth opportunities. With strong financial performance, operational efficiency, and strategic growth initiatives, Resideo Technologies, Inc. (NYSE:REZI) remains a compelling industrial distribution stock for investors looking for long-term value.
Ariel Focus Fund stated the following regarding Resideo Technologies, Inc. (NYSE:REZI) in its first quarter 2024 investor letter:
Additionally, supplier of residential thermal, comfort and security solutions, Resideo Technologies, Inc. (NYSE:REZI) advanced following a top- and bottom-line quarterly earnings beat. Despite a challenging macro environment and slower turnover in the housing market, stabilizing order rates and gross margin expansion aided share price appreciation. Additionally, management continues to return capital to shareholders through buybacks. In our view, the company’s best-in-class brand and vast distribution network create a narrow moat around the business resulting in high market share across its product portfolio. We believe REZI’s earnings potential is underappreciated and will be driven by a secular preference for more connected smart home solutions.
