Fortune Brands (NYSE:FO) continues to see strength across its diversified holdings, and as a result, it expects second-quarter earnings to hit the high end of analysts' earnings estimates. The company's continued optimism may be a good reason to take a closer look at its stock.
Fortune has been firing on all cylinders lately, which is impressive considering the number of them in its engine. The firm sells a broad range of products, including Moen bathroom fixtures, Titleist golf clubs, and Jim Beam whiskey. One has to wonder how the company manages to deliver solid results out of such a hodgepodge of offerings.
A major factor appears to be its ability to team up with high-profile partners. Fortune's recent alliance with Starbucks (NASDAQ:SBUX) to create a coffee-flavored liqueur is just one of many examples of its knack for making popular friends. In recent years, Fortune also has teamed up with Sweden's Vin & Sprit, makers of Absolut vodka, to support its spirits category and Home Depot (NYSE:HD), Lowe's (NYSE:LOW), and Sears (NYSE:S) to bolster its home-improvement products segment.
In addition, Fortune seems to be savvy at making smart acquisitions, an important feature for a holding company. The company's purchase of door maker Therma-Tru, for instance, is projected to add $0.15 to earnings this year. Who knew doors could be so profitable?
As fellow Fool contributor W.D. Crotty has remarked, Fortune's valuation is a tough nut to crack, given that its competitors range from Diageo (NYSE:DEO) to Masco (NYSE:MAS). Paying 18 times trailing earnings does not seem out of the ballpark, though, considering the company's broad portfolio and evident management prowess.
This is not to say that Fortune is invulnerable. Higher interest rates could throw a wet blanket on its home-products area. Still, other drivers, such as gains in its office-supplies segment from increased hiring, could be enough to offset blows elsewhere. In short, with the strong relationships Fortune has in place, and so much of its business likely to benefit from a growing economy, the firm does not have to rely on luck for improving results.
Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.
