There's a lot to like in the Q4 and full-year results released this morning by consumer products company Fortune Brands (NYSE:FO). 2003 revenues rose 9.5% (or about 5% before currency impacts and acquisitions), while operating income jumped 17% and net income rose 10% to $579 million.
The year finished strong for the purveyor of such brands as Moet faucets, Master Lock padlocks, Jim Beam-branded spirits, and Cobra golf products. Chairman and CEO Norm Wesley said all of the company's businesses were "at or above expectations" in Q4.
And that probably shouldn't surprise. Continued strength in homebuying would naturally help its home furnishings businesses. Branded spirits, wines, and golf products are natural in a spending environment where many consumers appear to be looking for a little added luxury without breaking the bank.
All told, the full-year income statement looks pretty good, with one blemish being that its cost of goods sold increased just slightly more quickly than did sales. Operating and net income growth, meanwhile, outpaced revenue growth -- both good signs. Operating income improved across the company's businesses even though one (office products) saw sales fall year-over-year.
Unfortunately, Fortune Brands doesn't provide detailed cash flow information in its earnings releases. (Neither, it should be noted, does peer Brown-Forman (NYSE:BF.B), which owns Lenox china, Hartmann luggage, Jack Daniel's whiskey, Fetzer wine and many other brands.) The limited free cash flow information provided is encouraging, with free cash flow for the year rising slightly thanks to decreased capital expenditures.
Another year of 10% net income growth would put Fortune Brands at roughly $640 million. The market is currently asking about 16 times that, which doesn't seem horribly out of whack even given the shares' remarkable, market-beating run over the last 12 months.
Talk about your old friend Jim Beam on our Fortune Brands discussion board.
Dave Marino-Nachison can be reached at [email protected].
