On Sep 26, 2014, we issued an updated research report on Brown-Forman Corporation (BF.B) following the company's first-quarter fiscal 2015 results, which marks a year-over-year improvement in both its top and bottom lines.
We are optimistic about this alcoholic-beverage company since it posted first-quarter earnings per share of 70 cents, which was nearly 6.1% higher than the year-ago quarter. The year-over-year rise in bottom-line results was primarily attributable to increased top-line performance and prudent cost management. Net sales for the fourth quarter increased 3% year over year to $921 million.
Further, bolstered by strong first-quarter results, Brown-Forman expects the growth story to continue in fiscal 2015 driven by solid worldwide demand for American whiskey. Therefore, the company anticipates that underlying and reported sales will grow in the range of 6% to 8% in fiscal 2015.
Apart from strong first-quarter results and an impressive guidance for fiscal 2015, the company has been performing well on the back of brand building and inorganic growth strategies.
We expect the company’s growth momentum to continue, given its sustained focus on pricing, product innovation and penetration in the emerging markets, which will help in boosting its operational performance and strengthening its position. Moreover, we consider Brown-Forman’s constant focus on developing the premium Jack Daniel’s brand through innovation and changes in packaging to have paid off.
However, rising tension between Russia and the West makes us little cautious. Moreover, risks arising from overseas market operations and stiff competition from other players, such as Constellation Brands, Inc. (STZ), Molson Coors Brewing Company (TAP) and Anheuser-Busch InBev SA/NV (BUD), may adversely impact its performance. Furthermore, distilled spirits are subject to excise tax and any increase could negatively impact the company’s bottom-line.
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