Brown-Forman Corporation BF.B has reported strong financial results for the fourth quarter and fiscal 2015. The company’s bottom-line results for both the periods registered a robust year-over-year improvement and were in line with the Zacks Consensus Estimate.
Earnings for the fourth-quarter came in at 66 cents per share, which rose 6.5% year over year and were in line with the Zacks Consensus Estimate. Also, the company’s fiscal 2015 earnings increased 5% year over year to $3.21 per share and met the Zacks Consensus Estimate. Results for the fiscal were adversely affected by foreign exchange rate and higher tax rate.
Net sales for the fourth quarter escalated 6% year over year to $947 million. However, on an underlying basis (excluding negative currency impact and other adjustments), sales grew 10%. Moreover, after deducting excise taxes, sales came in at $740 million, up about 7.4% from the prior-year figure of $689 million. The Zacks Consensus Estimate for the quarter was $706 million.
Growth in the quarter came on the back of the company’s strong portfolio of premium American whiskey brands and a balanced geographic approach.
Net sales for the fiscal increased 4% year over year to $4,096 million, while underlying sales were up 6%. Moreover, after deducting excise taxes, sales came in at $3,134 million, up 4.8% from the prior-year figure of $2,991 million. The Zacks Consensus Estimate for the fiscal was $3,109 million.
Quarter in Detail
In the fourth quarter, Brown-Forman’s gross profit increased about 7% to $527 million from $493 million in the year-ago comparable quarter, primarily due to favorable price mix. Consequently, gross margin improved 40 basis points (bps) to 55.6%.
Selling, general and administrative expenses (SG&A) fell nearly 10% from the year-ago quarter to $186 million. On the other hand, advertising expenses fell 3% year over year to $103 million.
Operating income jumped 23% year over year to $232 million, with the operating margin expanding 330 bps to 24.5%, as the benefit from improved gross margin and lower expenses were offset by adverse impact of foreign exchange. On an underlying basis, operating income rose 22%.
Balance Sheet & Cash Flow
Brown-Forman ended fiscal 2015 with cash and cash equivalents of $370 million and long-term debt of $748 million. The company’s total shareholders’ equity stood at $1,905 million, as of Apr 30, 2015.
During the fiscal, this Zacks Rank #3 (Hold) company generated $608 million of cash from operations. Also, over the same period, the company returned $718 million to shareholders in the form of dividends worth $256 million and share repurchases to the tune of $462 million.
FY16 Guidance
Brown-Forman expects the trends that have been driving growth since fiscal 2012 to boost fiscal 2016 results as well. These include sturdy demand for authentic American whiskey brands worldwide, consumer interest in flavored whiskey, and a rising trend toward premium spirits. Despite a mixed global economic outlook, the company anticipates growth in most of the prime markets, both developed and emerging.
The company anticipates 6% to 7% growth in underlying sales in fiscal 2016. It anticipates a modest growth in gross margin, while operating margin is expected to further expand on the back of SG&A investments made over the past few years. Moreover, operating income is expected to increase in the band of 8% to 10% on an underlying basis.
Based on anticipation of incremental negative impact from foreign exchange, lower in trade inventories, lower tax rate and diminished share count, the company has projected fiscal 2016 earnings per share in the range of $3.40–$3.60.
Stocks to Consider
Stocks performing well in the related beverages-soft drinks space are The WhiteWave Foods Company WWAV, Cott Corporation COT and Primo Water Corporation PRMW, all carrying a Zacks Rank #2 (Buy).
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