Leading supplier of residential thermal, comfort and security solutions, Resideo Technologies, Inc. (REZI, Financial) also traded lower in the period following an earnings miss and a subsequent reduction in full year guidance. Although end-customer demand remains steady, the company experienced a slowdown in orders across channel partners, as distributors reduced inventory levels due to macro uncertainty. Inflation, semi-conductor shortages, Fx headwinds and lower factory productivity also pressured margins. 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.
From John Rogers (Trades, Portfolio)' Ariel Fund fourth-quarter 2022 commentary.
