UPDATE 4-Fortune Brands profit beats; raises '10 view

Fri Jul 30, 2010 12:30pm EDT

* Q2 adj EPS 98 cents vs Street view 76 cents

* Net sales up 9 pct to $1.90 bln

* Sees '10 EPS $2.60-$2.90; prior view $2.50-$2.80

* Shares up 0.8 pct; S&P down 0.2 pct (Adds CFO comment)

By Martinne Geller

NEW YORK, July 30 (Reuters) - Consumer goods maker Fortune Brands Inc FO.N reported higher-than-expected quarterly profit on Friday as sales of faucets, windows and doors were strong ahead of the expiration of a tax credit.

The maker of Jim Beam bourbon, Moen faucets and Titleist golf equipment also raised its full-year profit forecast.

The company said second-quarter profit was boosted by 10 cents to 15 cents per share as the expiration of the U.S. homebuyer tax credit, plus the timing of spirits orders, pulled some demand into the second quarter at the expense of the third quarter.

In addition, Fortune said the second half of the year would be hit by higher costs for transportation and raw materials like zinc and brass, the stronger U.S. dollar, annualizing cost savings and increasingly difficult comparisons with last year's results.

Still, Fortune forecast 2010 earnings of $2.60 to $2.90 per share, up from a prior forecast of $2.50 to $2.80.

Morgan Stanley analyst Dara Mohsenian said the raised guidance came despite a sequential weakening of the U.S. housing market since the company's first-quarter report.

"We view the increase in guidance ... positively," Mohsenian said in a client note.

Fortune shares were up 0.8 percent at $43.71 on the New York Stock Exchange. That was slightly better than the Standard & Poor's 500 Index .SPX, which was down 0.2 percent after data showed U.S. economic growth slowed more than expected in the second quarter, underscoring worries about the recovery.

Fortune said it expects the global market for spirits to grow 1 percent to 2 percent this year, with the market for home and security goods up at a low single-digit rate.

"Given the pull-forward in demand due to the expiration of the home buyer tax credit and continuing signs of consumer caution, we believe the market's growth in the second half will be at a more moderate pace than it was in the first," Chief Financial Officer Craig Omtvedt said on a conference call.

BY THE NUMBERS

Fortune earned $227.4 million, or $1.48 per share, in the second quarter, up from $99.8 million, or 66 cents per share, a year earlier.

Excluding gains from the sale of its Cobra golf brand and the resolution of tax audits and lower year-over-year charges, earnings were 98 cents per share. On that basis, analysts on average were expecting 76 cents, according to Thomson Reuters I/B/E/S.

Net sales rose 9 percent to $1.90 billion. Comparable sales, which exclude excise taxes, foreign exchange and acquisitions and divestitures, rose 5 percent in the spirits business, 12 percent in the home and security business, and 8 percent in the golf business.

In the spirits business, case volume rose at a mid-single-digit rate.

Fortune said it expects the operating income of its spirits business to experience a hit of $10 million to $15 million in the second half of the year due to foreign exchange rates.

The company also forecast 2010 free cash flow $525 million to $600 million. (Reporting by Martinne Geller; editing by Dave Zimmerman and John Wallace)

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