Fortune Brands Inc.’s (FO) adjusted earnings for the third quarter of fiscal 2010 came in at 72 cents per share, falling short of the Zacks Consensus Estimate of 74 cents and the year-ago adjusted earnings of 77 cents. GAAP earnings came in at 66 cents compared with 82 cents posted in the year-ago quarter.
Meanwhile, net sales during the reported quarter grew marginally by 0.2% year over year to $1.72 billion. Total revenue failed to meet the Zacks Consensus Estimate of $1.75 billion.
The Home & Security segment reported sales of $813.7 million thereby, contributing 1.4% to net sales in the quarter and Spirit sales increased 1.0% to $643.1 million. However, this was offset by a 4.8% decline in Golf segment sales, dipping to $265.2 million.
Fortune Brands’ gross profit during the quarter rose 1.1% year over year to $833.7 million, while gross margin expanded 50 basis points (bps) to 48.4%. Operating income plunged 13.5% to $176.8 million, while operating margin declined 160 bps to 10.3% reflecting lower sales.
At the end of the quarter, Fortune Brands had cash and cash equivalents of $671.2 million and long-term debt-to-capitalization ratio of 39.8%, compared with a cash balance of $260.1 million and long-term debt-to-capitalization of 46.6% in the year-ago quarter.
During the quarter, the company generated free cash flows of $289.8 million, compared with $354.9 million in the year-ago period. For 2010, Fortune Brands now expects free cash flows of $625 million to $700 million, up from its previous projection of $525 million to $600 million.
The company expects to continue to deliver strong results for the rest of the fiscal year 2010, thus reaffirming its outlook. The company anticipates earnings in a band of $2.60 to $2.90 per share for fiscal 2010. The guidance remains in sync with the Zacks Consensus Estimate of $2.86 per share.
Fortune Brands’s shares maintain a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. Our long-term recommendation for the stock remains ‘Neutral’.
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