Q2 FY2026
Filed Aug 4, 2026Fortune Brands Announces Second Quarter Results, Underlying Financial Results In Line With Expectations
Q2 2026 sales decreased 4.1 percent, while EPS before charges / gains increased 35.0% and operating income before charges / gains increased 18.4%. Reported results included a ($1.44) asset impairment charge, producing GAAP EPS of ($0.19), while full-year guidance was updated for net tariff refunds and investments to enhance execution.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net salesGAAP | $1,153.9 | – | (4.1%) |
| Operating income/(loss)GAAP | ($9.0) | – | (105.2%) |
| Operating marginGAAP | (0.8%) | – | (1,510 bps) |
| EPSGAAP | ($0.19) | – | (122.7%) |
| Operating income/(loss) before charges / gainsnon-GAAP | $235.6 | – | 18.4% |
| Operating margin before charges / gainsnon-GAAP | 20.4% | – | 390 bps |
| EPS before charges / gainsnon-GAAP | $1.35 | – | 35.0% |
| Asset impairment charge impact on EPSother | ($1.44) | – | – |
| Net tariff refunds benefit to GAAP EPSother | $0.52 | – | – |
| Operating cash flowother | $202.8 million | – | – |
| Free cash flowother | $179.3 million | – | – |
| Net debtother | $2.3 billion | – | – |
| Net debt to EBITDA before charges / gainsnon-GAAP | 2.7x | – | – |
| Cashother | $210 million | – | – |
| Amount available under revolving credit facilityother | $858 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Water InnovationsOperating margin was 28.9% and operating margin before charges / gains was 29.5%. | $605.0 | – | (6.5%) |
| OutdoorsOperating margin was (48.7%), while operating margin before charges / gains was 15.2%. | $364.5 | – | (3.8%) |
| SecurityOperating margin was 26.6% and operating margin before charges / gains was 26.8%. | $184.4 | – | 3.8% |
2026 Full-Year Guidance outlook
- RevenueDown low single digits
- Tax rate24.0% to 24.5%
- NoteEPS before charges / gains: $3.22 to $3.52
- NoteOperating Margin before charges / gains: 14.0% to 15.0%
- NoteNet tariff refund benefit to EPS: $0.52
- NoteNet tariff refund benefit to Operating Income: $81 million
- NoteCash flow from operations: $495 million to $530 million
- NoteFree cash flow: $370 million to $420 million
- NoteInterest Expense: $108 million to $112 million
- NoteCapex: $110 million to $125 million
- NoteShare Count: 120 million to 120.5 million
- NoteGlobal market: Down low single digits
- NoteU.S. R&R: Down low single digits
- NoteU.S. SFNC: Down mid single digits
Capital returns
- Repurchased $2 million of its shares.
What drove it
- Net tariff refunds include anticipated gross tariff refunds, partially offset by increases in directly attributable variable incentive compensation costs and taxes (for EPS only).
- The Company expects net tariff refunds to benefit full year Operating Income and EPS by $81 million and $0.52, respectively.
- The updated full-year guidance reflects additional investments to enhance execution.
- The company stated its commercial performance and operating environment were consistent with its previous outlook.
Concerns
- Q2 2026 sales decreased 4.1 percent versus Q2 2025.
- Water Innovations net sales decreased 6.5%.
- Outdoors net sales decreased 3.8%.
- GAAP operating income/(loss) was ($9.0) and GAAP EPS was ($0.19).
- GAAP EPS included a ($1.44) asset impairment charge.
- Global market and U.S. R&R assumptions were down low single digits, and the U.S. SFNC assumption was down mid single digits.
What to watch
- Execution investments intended to improve service levels and accelerate new product development.
- Delivery of updated full-year EPS before charges / gains guidance of $3.22 to $3.52.
- Delivery of updated cash flow from operations guidance of $495 million to $530 million and free cash flow guidance of $370 million to $420 million.
- The expected $81 million Operating Income and $0.52 EPS benefit from net tariff refunds.
- Progress in Water Innovations and Outdoors net sales trends, and Security's reported 3.8% net sales growth.
Balance sheet and cash flow
- Liquidity of approximately $1.1 billion.
- Net debt: $2.3 billion.
- Net debt to EBITDA before charges / gains: 2.7x.
- Cash: $210 million.
- Amount available under revolving credit facility: $858 million.
- Generated $202.8 million in operating cash flow.
- Generated $179.3 million in free cash flow.
Analysis
Fortune Brands reported Q2 2026 net sales of $1,153.9, down 4.1% versus Q2 2025. Water Innovations sales declined 6.5% to $605.0 and Outdoors sales declined 3.8% to $364.5, while Security sales increased 3.8% to $184.4. The company characterized underlying financial results as in line with expectations.
Reported profitability was materially affected by charges and gains. GAAP operating income/(loss) was ($9.0), GAAP operating margin was (0.8%), and GAAP EPS was ($0.19). GAAP EPS included a ($1.44) asset impairment charge and a $0.52 benefit related to net tariff refunds. On a before-charges / gains basis, operating income/(loss) was $235.6, operating margin was 20.4%, and EPS was $1.35, with year-over-year changes of 18.4%, 390 bps, and 35.0%, respectively.
Segment margin performance diverged on a reported basis. Water Innovations reported a 28.9% operating margin and 29.5% operating margin before charges / gains. Outdoors reported a (48.7%) operating margin, but a 15.2% operating margin before charges / gains. Security reported a 26.6% operating margin and 26.8% operating margin before charges / gains.
The company generated $202.8 million in operating cash flow and $179.3 million in free cash flow during the quarter, and repurchased $2 million of shares. At quarter end, it reported liquidity of approximately $1.1 billion, net debt of $2.3 billion, net debt to EBITDA before charges / gains of 2.7x, cash of $210 million, and $858 million available under its revolving credit facility.
Full-year 2026 net-sales guidance remains down low single digits. EPS before charges / gains guidance was updated to $3.22 to $3.52 from $3.00 to $3.30, and operating margin before charges / gains was updated to 14.0% to 15.0% from 13.5% to 14.5%. The company expects net tariff refunds to benefit full-year Operating Income and EPS by $81 million and $0.52, respectively, while also funding incremental near-term investments to improve service levels and accelerate new product development. Cash flow from operations guidance was updated to $495 million to $530 million and free cash flow guidance to $370 million to $420 million.
Management, verbatim
Our second quarter results were in line with expectations, and we continue to focus on improving execution.
Jesse Singh, Chief Executive Officer
Our teams are moving with urgency to serve our customers better, bring greater discipline to our cost base, refocus resources on our core businesses and generate sustainable growth.
Jesse Singh, Chief Executive Officer
We expect net tariff refunds 1 to benefit full year Operating Income and EPS by $81 million and $0.52, respectively.
Ashley George, Interim Chief Financial Officer
Not in the filing
stated, not guessed- Exact fiscal quarter-end date.
- Gross margin.
- Net income.
- Prior-year and prior-quarter dollar amounts for total company metrics.
- Prior-quarter comparisons for total company and segment metrics.
- Segment operating income/(loss).
- Actual capital expenditures.
- Dividend declarations or payments.
- Gross debt.
- Prior guidance comparison using a previous earnings release outlook.
- Forward guidance for gross margin and operating expenses.
- GAAP full-year EPS, operating income, operating margin, net income, and gross margin guidance.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.