Fortune Brands Inc. (FO), a maker of distilled spirits, home/hardware products and golf equipment, on Wednesday reaffirmed its full-year 2009 targets for earnings and free cash flow, citing improvements in key economic measures and third-quarter order patterns being on expected lines. The stock is trading higher by over 7%.
The Deerfield, Illinois-based company confirmed its confidence of achieving full-year earnings target for adjusted earnings per share in the range of $2.00 to $2.30. Analysts expect full year earnings in the range of $2.10-$2.36 per share with a consensus of $2.24 per share.
While issuing the second-quarter results in July, the company had lowered the top end of its full-year earnings outlook range. On a GAAP basis, the company at that time expected full-year earnings per share from continuing operations in a range of $1.60-$1.90. The previous range for 2009 earnings before charges/gains from continuing operations was $2.00-$2.50 per share.
Fortune Brands pointed out then that the outlook revision was due to the continuing challenging conditions in the home and golf products markets and also because the high end of the outlook range was dependent on some measure of improvement in its markets. In remarks prepared for delivery today at the JP Morgan Diversified Industries Conference, Fortune Brands Chairman and Chief Executive Officer Bruce Carbonari said, "While consumers remain very cautious and the U.S. housing market remains challenged, we're encouraged by improvements in key economic measures, including consumer confidence and sales of new and existing homes. Additionally, our third quarter order patterns are tracking to our expectations and we're continuing to gain share in key product categories. Taken together, these factors enhance our confidence that we'll achieve our full-year earnings target for diluted EPS before charges/gains to be in the range of $2.00 to $2.30."
Several reports released recently point to a revival in economic activity. The Labor Department released a report on Wednesday showing that consumer prices increased by a little more than economists had been expecting in the month of August. The consumer price index rose 0.4% in August after coming in unchanged in July. The price growth came in slightly above the consensus estimate of economists, who had expected 0.3% growth.
Last week, a report showed that the preliminary Reuters/University of Michigan's consumer sentiment index rose to 70.2 in September from 65.7 in August. While the current conditions index rose 5.2 points to 71.8, the outlook index increased by 4.2 points to 69.2. Recent housing market data have shown an increase in builder confidence and a reduction in new home inventory levels.
The Beige Book released by the Federal Reserve said that economic activity continued to stabilize in the summer months, with five districts reporting an improvement, one district terming conditions as having firmed and five districts reporting more stable conditions. Only one district reported declining activity, although it suggested that the decline has moderated. Manufacturing conditions were said to be improving, aided by the automotive, high-tech and pharmaceuticals sectors.
Fortune Brands also reaffirmed today its expectation to generate free cash flow for 2009 in the range of $400 million after dividends and net capital expenditures. The company is expected to report results for the third quarter on October 23.
In July, Fortune Brands reported a 27% decline in second-quarter profit, hurt by double-digit sales declines in its home and golf products businesses due to continued lower construction and consumer spending. The company reported net income attributable to the company of $99.8 million, or $0.66 per share, down from $136 million, or $0.88 per share, in the year-ago quarter. Net sales dropped to $1.74 billion from $2.10 billion in the year ago quarter.
Last month, Moody's lowered the long and short term ratings of Fortune Brands, citing deteriorating financial metrics due to declining sales and profitability in the home and hardware and golf business. Moody's lowered the company's ratings to Baa3 from Baa2 and short term to Prime-3 from Prime-2 and termed the outlook negative.
FO is currently trading at $44.72, up $3.05% or 7.32%, on 407,293 shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.