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Fortune Brands Inc. (FO) is scheduled to release its first-quarter 2011 results on Thursday, May 5. 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 one 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 one 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 (BFA) 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.

Source: Fortune Brands Earnings Preview