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Fortune Brands profit tops lowered Wall St view

July 25 06:05:01 AM, Yahoo News

Reuters - Fortune Brands Inc reported operating profit that topped Wall Street's lowered expectations on Friday after the consumer products maker warned that weak consumer sentiment, the U.S. housing slump and higher taxes would depress earnings more than expected.

The maker of Jim Beam bourbon, Moen faucets and Titleist golf equipment said second-quarter net profit fell 41 percent to $136 million, or 88 cents per share, from $232 million, or $1.48 per share, a year earlier.

The results include a $60 million charge for such items as a write-down of the company's door business because of the housing slowdown.

Excluding special items, earnings were $1.25 per share, beating the analysts' average forecast of $1.20, according to Reuters Estimates.

Fortune also affirmed its full-year earnings outlook.

But its shares, which at Thursday's close were down 19 percent this year, were nearly unchanged on Friday.

Investor enthusiasm was probably muted as weakness across the company's portfolio drove earnings before interest and taxes down 24 percent, according to Goldman Sachs analyst Judy Hong.

"We are neutral on the stock as we expect continued housing weakness and soft spirits results will be overhangs, but valuation is undemanding here," Hong wrote in a research note, adding that commodity cost inflation and debt reduction were also ongoing challenges.

Fortune Brands warned last month that quarterly earnings from continuing operations would probably decline at a steeper-than-expected percentage rate in the high teens to mid-20s, due in part to an unexpected Australian tax increase on ready-to-drink spirits products.

Net sales fell 8.6 percent to $2.10 billion as increased premium spirits shipments in the United States and strong golf and home products sales in Asia could not fully offset the impact of the U.S. housing slump and the softening consumer environment.

Excluding the impact of excise taxes and foreign exchange rates, net sales fell 10 percent.

Chief Executive Bruce Carbonari said the environment in the second quarter was tougher than expected.

For the third quarter, the company said earnings, excluding special items, would be down in the mid-teens to mid-20s percentages from $1.34 a share a year ago.

For the full year, Fortune still forecast earnings before items falling at a percentage rate in the high single digits to the high teens, from $5.06 per share in 2007.

Analysts on average were expecting Fortune to earn $1.17 per share in the third quarter, down 12.7 percent from a year earlier, and $4.36 per share for the full year, down 13.8 percent from 2007.

Fortune shares were down 7 cents at $58.22 on the New York Stock Exchange.

(Reporting by Martinne Geller; Editing by Jeffrey Benkoe, Steve Orlofsky and Lisa Von Ahn)

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