(FO) Fortune Brands Beats Expectations on Higher Sales

Consumer products maker Fortune Brands (FO) reported first-quarter 2010 results with adjusted (excluding restructuring and other charges) earnings per share of 49 cents, comfortably beating the Zacks Consensus Estimate of 31 cents. The results were driven by healthy performance across all business segments.

The company posted a net income of $72.2 million (or 47 cents a share) compared to a net income of $7.4 million (or 5 cents a share) a year ago, representing a nearly ten-fold increase.

Revenue grew 12.9% to $1.6 billion, boosted by healthy growth across Spirits and Home Products businesses. Sales benefited by market share gains for major brands across the key markets, inventory rebuilding by channel partners and favorable foreign exchange movements.

Results by Division

Revenues from Home Products division grew 15.3% to $698.4 million, benefited by an improving consumer spending environment. The company registered double-digit sales growth for its Moen, Therma-Tru and Simonton brands.

Fortune Brands’ Spirits division posted revenues of $573.1 million, up 17.8% year-over-year, driven by the healthy performance of major brands, such as Jim Beam, Maker’s Mark and Sauza. Revenue from the Golf division rose 1.9% to $353.6 million as new products fueled sales for Titleist golf clubs and FootJoy shoes.

Financial Condition

At the end of the quarter, Fortune Brands had cash and cash equivalents of $289.7 million and total debt of roughly $4.4 billion. The company spent $31.4 million in capital expenditure in the quarter and generated a negative free cash flow of $103.3 million.

Outlook

Fortune Brands recently raised the bottom-end of its earnings guidance for full-year 2010 as it anticipates improved consumer spending across Spirits and Home Products units. The company now envisions adjusted earnings per share of $2.50-$2.80 for the year, an increase from $2.30-$2.80 per earlier guidance. The current Zacks Consensus Estimate for 2010 is $2.68. Fortune expects free cash flow for 2010 in the range of $375-475 million.

Zacks Investment Research

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