Earnings Preview: Fortune Brands - Analyst Blog
04 Mai 2011 - 3:15PM
Zacks
Fortune Brands Inc. (FO) is scheduled to
release its first-quarter 2011 results on Thursday, May 5, 2011.
The Zacks Consensus Estimate is 51 cents a share for the first
quarter of fiscal 2011. This represents a year-over-year estimated
growth of 4.1%.
Fourth Quarter Performance
Fortune Brands’ adjusted earnings for the fourth quarter of
fiscal 2010 came in at 63 cents a share, beating the Zacks
Consensus Estimate of 58 cents but falling short of the year-ago
adjusted figure of 66 cents. Earnings, on a GAAP basis, were 55
cents a share compared with 8 cents a share posted in the year-ago
quarter. Meanwhile, net sales during the reported quarter grew 5.5%
year over year to $1,895.5 million. Total revenue beat the Zacks
Consensus Estimate of $1,799 million.
Earnings Guidance
The company expects to sustain its growth momentum into fiscal year
2011. Fortune Brands anticipates 2011 earnings to grow in a range
of high-single-digit to high-teens.
Agreement of Analysts
Over the last 30 days, only 1 analyst out of 11 moved the
estimate downward while none of the analysts positively revised
their estimates, for the first quarter of fiscal 2011. For fiscal
2011, only 1 out of 13 analysts revised the estimate downward over
the last 30 days.
Magnitude of Estimate Revisions
The magnitude of estimate revisions for Fortune Brandsdepicts a
negative outlook for the upcoming quarter with the consensus
estimate dipping 1 cent over the last 30 days to 51 cents. For
fiscal 2011, a lack of estimate revision has resulted in the
consensus hitting a plateau, at $3.24, over the past one month.
Earnings Surprise
Considering earnings surprises, the stock has not been steady
over the last four quarters, with a mix of positive and negative
surprises ranging between a low of -2.7% and a high of 58.1%. The
average remained at 22.8%.
Our Recommendation
We have maintained our long-term 'Neutral' recommendation on
Fortune Brands Inc. However, the company has a Zacks #4 Rank,
implying a short-term 'Sell' rating on the stock.
Fortune Brands is a leading diversified consumer products
company that caters to a wide array of products ranging from home
and hardware to premium spirits and golf equipment. The
Illinois-based company manufactures and sources its products
largely from Canada, Mexico, Europe, China, Thailand and the U.S.
Fortune Brands offers its products mainly in the U.S., Canada,
Europe (primarily the U.K, Spain, Germany, and France), Australia,
and Mexico. The company possesses a portfolio of well-established
brands, such as Moen, Master Lock, Therma-Tru and Simonton in home
and security products; Jim Beam, Sauza and Maker's Mark in spirits;
and Titleist and FootJoy in golf products. The diversified
portfolio offers a unique competitive edge to the company.
Moreover, in March 2011, Beam Global Spirits & Wine, a unit
of Fortune Brands, added one more drink to its portfolio of spirits
by acquiring the brand Skinnygirl on undisclosed terms. Skinnygirl
is already a well-known brand in the U.S., popular among women
seeking low-calorie drinks. Beam Global's acquisition of this
premium brand would help leverage the company's strong distribution
and sales network, thereby adding more consumers and growing this
high-quality brand from coast to coast. The company intends to
include a few more drinks under the Skinnygirl brand, which would
facilitate in building a strong platform to drive future
growth.
Going ahead, Fortune has plans to split its three operational
segments into separate entities by the first half of fiscal 2011.
The company is looking for a tax-free spin-off to shareholders of
its Home and Hardware business while exploring the sale or a
tax-free spin-off of its Golf business. This will help the company
to maximize long-term value for its shareholders by separately
focusing on each business.
On the flip side, the company faces intense competition from
well-established players in the market such as Diageo
plc (DEO) and Brown-Forman Corporation
(BF.B) in its spirits business and Masco
Corporation (MAS) in its home and hardware business.
Fortune Brands also encounters competition from Nike
Inc. (NKE) in the golf business. Further, competition all
over the globe has also deepened. Consequently, the risk associated
with operating in such a competitive environment may undermine the
company's future operating performance.
BROWN FORMAN B (BF.B): Free Stock Analysis Report
DIAGEO PLC-ADR (DEO): Free Stock Analysis Report
FORTUNE BRANDS (FO): Free Stock Analysis Report
MASCO (MAS): Free Stock Analysis Report
NIKE INC-B (NKE): Free Stock Analysis Report
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