Dividend.com: Eye on Fortune Brands

The shares are getting very attractive at these levels and the 5.05% dividend yield is also looking good.

Author:: Tom Reese and Paul Rubillo
Publish date:: Oct 24, 2008 1:36 PM EDT

Fortune Brands Home Goods Drop, Liquor Sales Rise

Fortune Brands

just reported that its third-quarter profit rose 61%, as the company booked various one-time gains. The company reported EPS that came in 4 cents ahead of estimates, despite sales declining 10% to $1.92 billion.

The results included various one-time items, including a gain of 94 cents a share related to the early termination of the U.S. spirits distribution joint venture with V&S Group. The company saw a drop in demand for its home products, but some of its other brands experienced growth, such as Jim Beam and Maker's Mark bourbons, Courvoisier cognac, Titleist golf balls and Master Locks.

Management said the current economic environment will present near-term challenges as consumers navigate the global credit crisis and as the U.S. housing correction continues.

We had removed shares of FO from our "Recommended" list back on Aug. 19 when they were trading at $59.77. The company has a dividend yield of 5.05% based on last night's closing stock price of $34.85. The company is trading at 11 times the low end of 2009 estimates. The shares are getting very attractive at these levels and the dividend yield is also looking good. We are putting the stock on our upgrade watch list for a potential ratings upgrade. Fortune Brands is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.

Gannett Advertising Revenue in Steep Decline, Profit Falls 32%

Newspaper giant

Gannett

(GCI) - Get Report

reported Thursday that its third-quarter profits fell 32%, as the company brought in significantly less advertising revenue than last year. The weak economy has compounded problems for newspapers, as retailers, employers and real estate agents are spending less money on promotions and other advertising.

Take a look at the following drops in Gannett's revenue numbers: classified revenue for real estate spiraled 41.5%, while the company saw a 34% drop in sales for help wanted ads. Political advertising helped offset some of the losses, but that boon will soon pass after the November elections. The company intends to suspend monthly revenue reports indefinitely, citing month-to-month volatility of online revenue trends. This type of measure is never a good sign.

The Bottom Line We have avoided shares of GCI since our early June coverage began, when shares were trading at $27.75. The company is currently sporting an in-all-likelihood unsustainable 16.60% dividend yield, based on last night's closing stock price of $9.64. We would ignore the large yield, and expect a dividend cut to be announced at some point in the near future. There are no catalysts or company news on the horizon to make us optimistic about considering a move into the shares.

Gannett is not recommended at this time, holding a Dividend.com Rating of 3.3 out of 5 stars.

Ingersoll-Rand Revenue Jumps After Trane Acquisition

Ingersoll-Rand

(IR) - Get Report

just reported that net income for the third quarter declined to $227.7 million, or 70 cents per share, down from $266.6 million, or 92 cents per share, a year ago. The company's revenue rose, however, to $4.31 billion from $2.24 billion, with the help of its recent acquisition of air conditioning company Trane.

Management said the momentum it had seen in key end-markets for most of the year slowed substantially in August and September. The company said it would be taking additional actions to reduce costs and accelerate productivity. As for the outlook, the company now sees EPS to come in a range of $3.35-$3.55. Consensus estimates are for $3.45.

We had removed shares of IR from our "Recommended" list Sept. 9, when shares were trading at $35.91. The company has a 3.97% dividend yield, based on last night's closing stock price of $18.14. The stock is trading at seven times the low end of 2009 estimates. We think there may be some value here and will be watching shares of the stock closely. Ingersoll-Rand is not recommended at this time, holding a Dividend.com Rating of 3.2 out of 5 stars.

Commodity Boom Propels Burlington Northern Earnings

Burlington Northern Santa Fe

(BNI)

reported Thursday that its third-quarter earnings grew 31% on better yields and higher fuel surcharges. The freight rail transportation company beat EPS estimates by 31 cents, as revenue rose 21% to $4.91 billion. The company credited improved efficiency, coupled with about $570 million in higher fuel surcharges for the improved results. Much of the company's earnings success came as a result of commodity strength. Agricultural products revenue rose 33%, and coal revenue rose 23% during the quarter.

The company expects to report fourth-quarter earnings between $1.70 and $1.80 per share, which is above the consensus estimates of $1.71 per share.

We had removed shares of BNI from our "Recommended" list Aug. 11 when shares were trading at $101.43. The company now has a dividend yield of 1.96%, based on last night's closing stock price of $81.58. We are still concerned the company will see some weakness, now that the recent commodity boom has entered a correction period.

We'd like to see what the next quarter shapes up to be before we consider any ratings upgrades. Burlington Northern Sante Fe is not recommended at this time, holding a Dividend.com Rating of 3.3 out of 5 stars.

At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.

Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.