Fortune Tops, Guidance Falls

Fortune Brands Inc. (FO) reported fourth quarter results before the opening bell today. The company swung to a net income of $11.5 million from a net loss of $281.3 million in the year-ago quarter. Excluding special items, earnings per share came in at 66 cents, which topped the Zacks Consensus Estimate of 51 cents derived from 9 covering analysts.

However, the company offered a conservative outlook for 2010 and said that it expects EPS of $2.30 to $2.80 per share, which is below the Zacks Consensus Estimate of $2.89 per share derived from 12 covering analysts. Fortune Brands also stated that earnings for the first quarter of 2010 is expected to be lower compared to the year-ago period due to higher brand investment in the Spirits business and incremental costs associated with restructuring efforts.

The Zacks Consensus Estimate on the company’s earnings for the first quarter is currently pegged at 46 cents per share, which reduced by 7 cents over the past month as 1 of 6 covering analysts lowered expectations.

Meanwhile, net sales for the fourth quarter of 2009 grew slightly to $1.80 billion from $1.79 billion in the year-ago quarter, primarily due to growth in Spirits and Golf businesses. However, the top-line increase was partially offset by revenues declines in Fortune Brands’ Home Products business.

Home Products declined 3.3% to $823.8 million as Fortune Brands continued to face the adverse impact of conservative spending by consumers on big-ticket discretionary items. However, the company witnessed improved results in Moen and Simonton brands, which helped moderate the sales decline in this segment.

Fortune Brands’ Spirits division recorded a growth of 3.5% year-over-year to $746.4 million, mainly driven by improved performance by Jim Beam and Maker’s Mark brands in the U.S, which more than offset sluggishness in certain international markets. Moreover, the segment’s sales also benefitted from favorable foreign currency translations.

The Golf segment rose by 6.9% to $226.9 million as Fortune Brands outperformed the industry with double-digit sales increases for Titleist golf balls and FootJoy shoes coupled with solid performance in Asian markets.

At the end of the quarter, Fortune Brands had cash and cash equivalents of $417.2 million and long-term debt of $4.4 billion, compared to $163.3 million of cash and $4.7 billion of long-term debt in the year-ago period. During 2009, the company generated free cash flow of $724.7 million, compared to $691.5 million in the year-ago period. For 2010, Fortune Brands expects free cash flow to range between $375 million and $475 million.

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