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Fortune Brands, Inc. (NYSE: FO) has come clean with a lowered earnings guidance for the current quarter and full year of 2008.  The company noted that a weakening consumer sentiment in the U.S., the ongoing correction in the U.S. housing market, and a large and unexpected Australian tax increase on ready to drink spirits products have all culminated together to create a more challenging environment for the company’s products.

The company now expects pre-charge/gain earnings to be down at a high-teens-to-mid-20’s percentage rate compared to diluted EPS of $1.51 before charges/gains for continuing operations in the year-ago quarter. This is worse than its previous forecasts of being down at a high-single-digit-to-mid-teens percentage rate.  If we maximized the warning and took a mid-20’s percentage rate, this could generate an effective EPS report of $1.13.  First Call has estimates at $1.32 currently.

It does expect that results in the second half of 2008 will be better than the first half because of company-wide productivity initiatives and increased brand-building investments. For the full year 2008, the company now expects to generate diluted EPS before charges/gains that is down at a high single-digit to high-teens percentage rate compared to $5.06 in 2007. The company’s previous full-year target was for diluted EPS before charges/gains to be flat to down at a high-single-digit percentage rate versus 2007’s results. 

If we interpolate that earnings, this could be anywhere from around $4.10 to $4.60 depending on where your starting point is.  Current First Call estimates are $4,79 EPS, so either way this is a big shortage. 

Fortune closed up marginally by $0.04 in regular trading at $62.41 today.  Shares are now down almost 5.5% at $59.00 in after-hours trading.  Go ahead and chalk that up as another 52-week low.  The prior range was $62.01 to $90.80.  So much for good old fashioned booze as being a defensive sector.

Jon C. Ogg
June 30, 2008