Fortune Brands 2025 Q1 Earnings Misses Targets as Net Income Falls 46.7%

Fortune Brands (FBIN) reported its fiscal 2025 Q1 earnings on May 07th, 2025. Fortune Brands did not meet expectations with a 46.7% decline in net income compared to the previous year. The company has suspended detailed full-year guidance due to uncertainty in consumer demand. However, EPS guidance will be provided based on various volume scenarios. Despite challenges, Fortune Brands remains committed to its long-term strategy, focusing on brand-driven categories and digital innovation. The company is addressing anticipated tariffs with cost management and sourcing adjustments to mitigate potential impacts.

Revenue
Fortune Brands' total revenue for the first quarter of 2025 decreased by 6.9% to $1.03 billion, compared to $1.11 billion in the same quarter of 2024. The Water segment contributed $565.40 million, while the Outdoors segment generated $304.70 million. The Security segment brought in $163 million. There were no corporate expenses reported for this quarter, making the total net sales $1.03 billion.

Earnings/Net Income
Fortune Brands experienced a decline in its earnings per share (EPS), which decreased by 45.5% to $0.42 in Q1 2025 from $0.77 in Q1 2024. The company's net income fell to $51.40 million, a 46.7% decrease from the $96.40 million reported in Q1 2024. This significant drop indicates a challenging quarter for the company.

Post-Earnings Price Action Review
The strategy of buying Fortune Brands (FBIN) shares after a quarter with declining revenue and holding them for 30 days has consistently underperformed over the past five years. This approach resulted in a -1.38% return, which starkly contrasts with a benchmark return of 31.47%. The excess return of -32.86% and a compound annual growth rate (CAGR) of -0.69% highlight the negative outcomes of this strategy. Further underscoring its shortcomings, the strategy experienced a maximum drawdown of -14.15% and a Sharpe ratio of -0.07, indicating high risk and unfavorable returns. Investors considering this approach should be cautious, given its historical performance.

CEO Commentary
“During the first quarter, we delivered margins and earnings per share in-line with our expectations,” said Fortune Brands Chief Executive Officer Nicholas Fink. He noted that rapidly changing geopolitical and macroeconomic environments affect consumer demand. Fink emphasized the company's focus on mitigating tariff impacts, making key investments, and expanding its digital business while maintaining a strong balance sheet. He expressed confidence in leveraging a robust U.S. manufacturing presence to drive market outperformance and affirmed the company’s long-term strategy amid an uncertain landscape, highlighting a commitment to managing costs and cash effectively.

Guidance
Due to uncertainty around consumer demand and volumes, the Company is not providing detailed 2025 full-year guidance. However, it will outline an EPS guidance framework based on different volume scenarios during the earnings call. Fortune Brands is strategically addressing anticipated tariff impacts through sourcing adjustments and cost management initiatives. The Company remains focused on its long-term strategy centered on brand-driven categories and innovation, with an ongoing emphasis on enhancing its digital strategy.

Additional News
Fortune Brands Innovations announced the appointment of Jonathan Baksht as Executive Vice President and Chief Financial Officer, effective May 5, 2025. Baksht brings extensive experience from his previous roles as CFO at Pactiv Evergreen and Valaris. This leadership change comes as the company focuses on executing its strategic priorities and enhancing shareholder value. Additionally, Fortune Brands is advancing its digital transformation through a partnership with Augury, implementing AI-based Machine Health solutions to boost operational efficiency. The company also reported a share repurchase of $175 million in the first quarter, highlighting its commitment to returning value to shareholders.