UPDATE 4-Fortune Brands tops view, but outlook falls short

* Q4 EPS ex-items 66 cents; Wall Street view 52 cents

* CEO says consumers still cautious

* Sees 2010 EPS ex-items $2.30-$2.80: Wall St view $2.88

* Shares down 2 pct
(Adds company and analyst comments; updates stock activity)

By Jessica Wohl

CHICAGO, Jan 29 (BestGrowthStock) – Fortune Brands Inc (FO.N: )
forecast 2010 earnings below Wall Street expectations as
consumers continue to shun big purchases, sending shares of the
maker of Jim Beam bourbon down 2 percent.

The company also reported fourth-quarter results that
topped forecasts, but said it was starting 2010 with the
assumption that the markets for its three businesses —
spirits, home goods and golf — will be flat to up at a
low-single-digit percentage rate.

While market conditions for home products, such as Moen
faucets, are stabilizing, the company said earnings in the
current quarter could fall as it invests more behind its
spirits business and absorbs other costs.

Another issue facing Fortune is that while shoppers have
headed back to stores, pricey items are still a tough sell.

“Consumers remain cautious, particularly when it comes to
big-ticket discretionary purchases,” Chief Executive Officer
Bruce Carbonari said in a statement. “We believe consumers will
remain cautious while employment, credit markets, home values
and consumer confidence continue to mend.”

Fortune forecast 2010 earnings of $2.30 to $2.80 per share
excluding one-time items, short of analysts’ average forecast
of $2.88. Carbonari said higher energy and raw material costs
were likely to offset any benefit from improved foreign
exchange rates.

Fortune shares were down 2 percent to $42.47 in
early-afternoon trade on the New York Stock Exchange after
falling as low as $41.73 earlier.

“Certainly their guidance looks pretty conservative,” said
Edward Jones senior consumer analyst Robin Diedrich.

Diedrich, who rates Fortune a “buy,” said she likes the
potential for the spirits business, which is bringing out new
products and has a growing international business.

Fortune said priorities for spirits acquisitions would be
adding rum or vodka and expanding into more emerging markets.

Beyond acquisitions, other uses of cash could include
building its dividend over time, after slashing it in April.
[ID:nN28303339] Share buybacks are not in its near-term plans.


Sales in the spirits segment, which also includes Sauza
tequila and Courvoisier cognac, rose 3.5 percent in the fourth
quarter, helped by U.S. demand for Jim Beam and Maker’s Mark as
well as the weaker dollar.

While spirits sales trail those of the home and security
business, spirits account for the biggest chunk of the
company’s operating income. Operating income, before items,
rose 1.5 percent in that unit.

Fortune said the U.S. spirits industry saw sales rise 1
percent in 2009, while beer sales fell 2 percent to 3 percent.

The spirits business has been relatively stable and helped
the company through the collapse of the U.S. housing market and
weak economy, which clobbered sales in the home business.

Declines in the home business, which includes windows,
doors, cabinets and faucets, have moderated amid signs of
stabilization in the economy. Home products sales fell just 3.3
percent in the fourth quarter after declines of 17 percent in
the third quarter, 23 percent in the second quarter and 30
percent in the first quarter. Operating income, before items,
rose 5.1 percent in that unit.

Sales of golf equipment rose 6.9 percent, led by
double-digit increases for Titleist golf balls and FootJoy
shoes, and strong growth in Asia. Golf, the company’s smallest
business, posted an operating loss.

Fortune reported earnings of $11.5 million, or 8 cents per
share, for the fourth quarter, compared with a year-earlier
loss of $281.3 million, or $1.88 per share.

Excluding one-time items, profit was 66 cents per share.
Analysts on average expected 52 cents, according to Thomson
Reuters I/B/E/S.

Sales increased 0.6 percent to $1.8 billion, while analysts
were expecting $1.67 billion.

Stock Research

(Reporting by Jessica Wohl in Chicago and Martinne Geller in
New York; editing by John Wallace)

UPDATE 4-Fortune Brands tops view, but outlook falls short