Brown-Forman Stays Neutral - Analyst Blog
20 Juli 2012 - 8:55PM
Zacks
We are maintaining our long-term
Neutral recommendation on Brown-Forman Corporation
(BF.B). Moreover, the company has a Zacks #3 Rank implying a
short-term Hold rating.
Battered by higher excise tax along
with increased operating expenses, Brown-Forman reported a weak
fourth-quarter 2012 results with earnings falling 5.2% to 73 cents
per share, missing the Zacks Consensus Estimate of 76 cents.
Moreover, the company’s net sales of $801.3 million also fell short
of the Zacks Consensus Estimate of $805 million, but managed to
register a year- over-year growth of 1%.
Moreover,gross profit margin shrunk
90 basis points (bps) to 52.6% due to increased excise taxes, while
higher advertising and selling, general and administrative
(SG&A) expenses led to a contraction of 60 bps in operating
margin to 19.6%.
However, Brown-Forman expects solid
improvement in customer trends in the remaining period of fiscal
2013. Moreover, based on high-single digit growth expectation in
net sales and operating income, the company anticipates fiscal 2013
earnings in the range of $3.60 to $4.00 per share.
Further, we believe Brown-Forman’s
strategy of expanding Jack Daniel's market share in the developed
markets, such as France and the U.S., and emerging markets
including Russia, Poland and Mexico, where the whiskey category is
in early stages of development, will boost its top line. In
addition, the company’s plan to build new cooperage for
manufacturing barrels for Jack Daniel’s Tennessee Whiskey will
facilitate it in continuing supply of this premium whiskey along
with its demand.
Brown-Forman is one of the leading
producers and distributors of premium alcoholic beverages in the
world. The company commands a strong portfolio of globally
recognized brands, such as Jack Daniel’s, Finlandia, Southern
Comfort and Canadian Mist. This provides a competitive edge to the
company and bolsters its well-established position in the
market.
However, continued macroeconomic
headwinds and the resultant cutback in discretionary spending along
with intense competition from other well-established players in the
industry, including Beam Inc. (BEAM) and
Diageo plc (DEO) may weigh upon the company’s
growth prospects.
BEAM INC (BEAM): Free Stock Analysis Report
BROWN FORMAN B (BF.B): Free Stock Analysis Report
DIAGEO PLC-ADR (DEO): Free Stock Analysis Report
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