Earnings Preview: Brown-Forman - Analyst Blog
24 August 2012 - 1:45PM
Zacks
Brown-Forman
Corporation (BF.B) is scheduled to report its financial
results for the first quarter of fiscal 2013 before the opening
bell on August 29, 2012. The current Zacks Consensus Estimate for
the quarter is 62 cents per share. For the quarter under review,
revenue is expected to be $893 million, according to the Zacks
Consensus Estimate.
With respect to earnings surprises,
Brown-Forman has missed the estimate thrice over the trailing four
quarters in the range of flat to negative 7.5%. The average
surprise over the last four quarters remained at negative 4.4%.
Fourth-Quarter 2012 - A
Synopsis
Brown-Forman’s adjusted earnings of
73 cents per share for the fourth quarter of fiscal 2012 missed the
Zacks Consensus Estimate of 76 cents and declined approximately
5.2% from the year-ago earnings of 77 cents. A higher excise tax
along with increased operating expenses affected the company’s
bottom line.
Brown-Forman's reported net sales
inched up 1% to $801.3 million, missing the Zacks Consensus
Estimate of $805 million. However, the company’s underlying net
sales registered 10% growth year over year.
Zacks
Consensus
The analysts following the stock
expect Brown-Forman to post first quarter earnings of 62 cents a
share, higher than 54 cents delivered in the prior-year quarter.
Currently, the Zacks Consensus Estimate ranges between 57 cents and
66 cents a share.
For fiscal 2013, the Zacks
Consensus Estimate stands at $2.61 per share, higher than the
year-ago fiscal earnings of $2.37. The current estimate ranges
between $2.57 and $2.67 per share.
Earnings Estimate
Revisions
Agreement
For the first quarter of fiscal
2013, of the 6 analysts providing estimates, none has revised their
estimates in either direction over the last 7 and 30 days.
For fiscal 2013, 1 analyst
downgraded its estimate in the last 30 days, while no movement seen
in the opposite direction. In the last 7 days, of the 6 analysts
providing estimates, none has revised their estimates in either
direction.
Magnitude
The magnitude of estimate revisions
for Brown-Forman depicts a neutral outlook for the first quarter
and fiscal 2013. Over the last 7 and 30 days, estimates for the
upcoming quarter and fiscal 2013 have remained unchanged at 62
cents and $2.61 per share, respectively.
Our
Recommendation
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. We believe this provides a competitive
edge to the company and bolsters its well-established position in
the market.
Moreover, we believe Brown-Forman’s
strategy of expanding Jack Daniel's market share in 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.
However, apart from macroeconomic
headwinds, distilled spirits are subject to excise tax in various
countries. Rising fiscal pressure in the U.S., European and many
emerging markets may lead to increasing risk of a potential excise
tax on spirits by the governments of respective countries. The
effect of any excise tax increase in future may have an adverse
effect on Brown-Forman’s financial performance.
Above all, the company faces
intense competition from other well-established players in the
industry, including Beam Inc. (BEAM),
Constellation Brands Inc. (STZ) and Diageo
plc (DEO). Moreover, Brown-Forman encounters competition
from local and regional players in the respective countries.
Consequently, this may dent the company’s future operating
performance.
Currently, Brown-Forman has a Zacks
#3 Rank, which implies a short-term Hold rating. Moreover, we
maintain a long-term ‘Neutral’ recommendation on the stock.
BEAM INC (BEAM): Free Stock Analysis Report
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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