Brown-Forman Corp. (BF.B), the world’s leading producer and distributor of premium alcoholic beverages, remains well positioned with its strong portfolio of over 25 premium brands, including Jack Daniel’s – its flagship spirits brand – followed by Southern Comfort liqueur, Canadian Mist whiskey, Finlandia vodka as well as the Fetzer and Korbel wine brands.
We believe that the company’s consistent focus on developing its premium Jack Daniel’s brand through innovation and packaging changes has paid off, helping it to become a thriving company. Brown-Forman plans to expand Jack Daniel's market share in the developed markets, such as France and the U.S., and emerging markets such as Russia, Poland, and Mexico, where the whiskey category is in the early stages of development. In the near future, the company seeks to expand the sphere of other brands, such as Gentleman Jack, Jack Daniel's Single Barrel and Jack Daniel's ready-to-drink within Jack Daniel’s.
Moreover, we expect the company’s pricing strategy, product innovation and penetration in emerging markets to drive growth.
The Louisville, KY-based company managed to post a year-over-year increase in its second-quarter fiscal 2015 top- and bottom-line results despite an adverse impact from foreign currency translation. The company’s earnings of 97 cents per share climbed nearly 1% year over year, but fell short of the Zacks Consensus Estimate of $1.05.
Net sales for the second quarter increased 5.2% year over year to $1,135 million, backed by sales improvement witnessed in various brands, particularly its Jack Daniel’s trademark. Moreover, after deducting excise taxes, sales came in at $877 million, up 5.3% from the prior-year figure of $833 million. The Zacks Consensus Estimate for the quarter was $896 million.
Coming to the expectations for fiscal 2015, the company reaffirmed its fiscal guidance range of 6% to 8% growth in underlying sales, on the assumption that the international market conditions will not worsen going forward.
However, the company came up with cautious earnings guidance for fiscal 2015 as it expects foreign exchange headwinds to continue. The company lowered its earnings guidance to a band of $3.15–$3.35 per share for fiscal 2015, compared to $3.25–$3.45 projected earlier. This, in turn, pulled down the Zacks Consensus Estimate for the upcoming quarter, fiscal 2015 and fiscal 2016 over the last 30 days.
Moreover, stiff competition and risks arising from overseas market operations may adversely impact its performance. The company also remains prone to probable increase in excise taxes that may negatively impact its bottom line.
Other Stocks to Consider
Currently, Brown-Forman carries a Zacks Rank #4 (Sell). A better-ranked stock in the beverages-alcohol industry is Boston Beer Co. Inc. (SAM), with a Zacks Rank #1 (Strong Buy). Other well-ranked stocks in the related beverage soft drinks space include Monster Beverage Corp. (MNST), sporting a Zacks Rank #1, and Keurig Green Mountain Inc. (GMCR), carrying a Zacks Rank #2 (Buy).
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