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 – along with Southern Comfort liqueur, Canadian Mist whiskey, Finlandia vodka as well as the Fetzer and Korbel wine brands.
Brown-Forman’s constant focus on pricing, product innovation and expansion solidify its market position. Further, the company plans to expand Jack Daniel's market share in both developed markets such as France and the U.S. and emerging markets like Russia, Poland, and Mexico, where the whiskey category is in the early stages of development.
The company is also on track to expand the sphere of other brands such as Jack Daniel's Tennessee Honey, Jack Daniels Fire, Gentleman Jack and Jack Daniel's Single Barrel within Jack Daniel’s. Furthermore, the company is looking for opportunities to enter the fastest-growing spirit category – the Irish whiskey, as evident from its recent move of purchasing all the shares of Slane Castle Irish Whiskey Limited. The respective distillery will open in late 2016 and begin producing Irish whiskey in the spring of 2017. In another stride, the company acquired two historic properties at West Main Street in Louisville, KY to boost its Old Forester brand.
Brown-Forman reported robust first-quarter fiscal 2016 earnings driven by its strong portfolio of premium American whiskey brands, its Jack Daniel’s trademark and a balanced geographic approach. The company’s earnings of 75 cents per share were a penny ahead of the Zacks Consensus Estimate and up 7% from 70 cents earned in the prior-year quarter.
However, the company’s results were significantly impacted by unfavorable foreign currency translations, which led sales to fall year over year. Though the company reiterated its favorable outlook for fiscal 2016, it expects currency headwinds to linger throughout the fiscal, weighing somewhat on the results.
This Louisville, KY-based company 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. Anticipating that the global economy will remain at the current levels, the company expects growth in most of the prime markets, both developed and emerging.
However, stiff competition and risks arising from operations in overseas markets may adversely impact the company’s performance. This Zacks Rank #3 (Hold) company also remains prone to probable increase in excise taxes that may negatively impact its bottom line.
Stocks to Consider
Some better-ranked stocks in the related beverages-soft drinks space are Compania Cervecerias Unidas S.A. CCU, with a Zacks Rank #1 (Strong Buy), Castle Brands Inc. ROX and Constellation Brands Inc. STZ, both carrying a Zacks Rank #2 (Buy).
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