Brown-Forman Hits Record Sales - Analyst Blog
09 Dezember 2011 - 10:45AM
Zacks
Brown-Forman Corp.
(BF.B) reported a record fiscal 2012 second-quarter result, as it
is first time in the company’s history that it crossed the $1
billion sales mark.
The company’s reported earnings of
$1.09 per share came in line with Zacks Consensus Estimate and grew
3.8% from the year-ago earnings of $1.05.The robust increase in
quarterly earnings was primarily driven by strong top-line growth
and volume gains.
During the quarter earnings per
share grew 8% after excluding the net effect of Hopland-based wine
business.
Quarterly
Details
Brown-Forman's net sales recorded a
growth of 11.9% to $1,013.7 million from $905.7 million in the
prior-year quarter. The growth was primarily attributable to solid
performance in Germany, Turkey, France, the U.K., Russia, Canada,
Australia and Brazil, which was more than offset by declines in
Poland and Spain. Total Revenue beat the Zacks Consensus Estimate
of $966 million.
During the quarter, Brown-Forman's
gross profit grew 9.4% from the prior-year quarter to $501.9
million primarily driven by increased volumes. However, gross
margin contracted 120 basis points (bps) year over year to 49.5%
due to increased input and excise costs.
During the quarter, the company
made huge advertising expenses in order to support several brand
innovation launches. Advertising expenses increased 14.1% year over
year to $106.7 million. Selling, general and administrative
expenses surged 10.5% year over year to $146.8 million due to
increased salary and related expenses. Conversely, Brown-Forman's
operating profit grew 4.8% from the prior-year quarter to $246.3
million, while operating margin contracted 160 basis points to
24.3% from the prior-year period.
Balance Sheet & Cash
Flow
Brown-Forman ended the quarter with
cash and cash equivalents of $380.1 million and long-term debt of
$504.2 million.
During the first six months of
fiscal 2012, Brown-Forman generated $155.5 million of cash from
operations and deployed $92.4 million for dividend payout, and
$18.8 million on capital expenditures. On November 30, 2011,
Brown-Forman’s $250 million share repurchase program expired.
During the program period, the company repurchased a total of 3.4
million shares for $234 million, at an average price of $69.39 per
share.
Dividend
During the quarter, Brown-Forman
paid a regular quarterly cash dividend of 35 cents a share on Class
A and Class B common stock, an increase of 9.4% over the prior
dividend. This is the company’s 28th consecutive year of
dividend growth.
Guidance and Zacks
Consensus
Moving forward, Brown-Forman
expects strong improvement in customer trends in the remaining
period of fiscal 2012. However, it also anticipates that the
stronger U.S. dollar value may have an adverse impact on its
bottom-line. Accordingly, the company has lowered its upper end of
earnings guidance. Currently, Brown-Forman expects fiscal 2012
earnings in the range of $3.45 to $3.70 per share instead of $3.45
to $3.85. Currently, the Zacks Consensus Estimate stood at $3.63
per share.
Brown-Forman, which competes with
Constellation Brands Inc. (STZ) and Diageo
plc (DEO), currently holds a Zacks #4 Rank, implying a
short-term ‘Sell’ rating on the stock. Besides, the company retains
a long-term 'Outperform' recommendation on the stock.
BROWN FORMAN B (BF.B): Free Stock Analysis Report
DIAGEO PLC-ADR (DEO): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis Report
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