Brown-Forman Corp. (BF.B) recorded fiscal 2011 fourth-quarter earnings of $1.13 a share compared with 49 cents a share in the year-ago quarter. The Zacks Consensus Estimate for the quarter was 64 cents a share.
The robust increase in quarterly earnings was primarily driven by strong top-line growth and improved margin along with benefit from sale of Hopland based wine business and low tax rate.
Quarterly Details
Brown-Forman's net sales recorded a growth of 8.0% to $791.3 million from $733.0 million in the prior-year quarter. The growth was primarily attributable to solid performance in Australia, the U.K., Mexico, Turkey, Germany, and France.
During the quarter, Brown-Forman's gross profit grew 12.0% from the prior-year quarter to $423.3 million, while gross margin increased 200 basis points (bps) year over year to 53.5%. Advertising expense climbed 11.0% year over year to $99.7 million, primarily due to higher spending to support Jack Daniel’s Tennessee Honey brand.
Selling, general and administrative expenses inched up 1.0% year over year to $166.9 million. Conversely, Brown-Forman's operating profit surged 87.0% from the prior-year quarter to $221.9 million, while operating margin expanded 1.73 times to 28.0% from the prior-year period.
Balance Sheet & Cash Flow
Brown-Forman ended the quarter with cash and cash equivalents of $567.0 million and long-term debt of $504.0 million compared with $232.0 million and $508.0 million in the prior-year quarter, respectively.
Year-to-date, Brown-Forman generated $527.0 million of cash from operations and deployed $326.0 million for dividend payout, and $39.0 million on capital expenditures. The company repurchased up to $136.0 million of Class A and Class B shares, out of which $118.0 million were a part of $250.0 million share repurchase program which expired on December 1, 2010 and $18.0 million were under a part of ongoing $250.0 million share repurchase program to be expired on November 30, 2011.
Dividend
During the quarter, Brown-Forman paid a regular quarterly cash dividend of 3.2 cents a share on Class A and Class B common stock.
Guidance and Zacks Consensus
Moving forward, Brown-Forman anticipates moderate improvement in global economic conditions and customer trends in fiscal 2012. Accordingly, the company has delivered its earnings guidance in the range of $3.45 to $3.85 per share.
Brown-Forman, which competes with Constellation Brands Inc. (STZ) and Diageo plc (DEO), currently holds a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. Besides, the company retains a long-term 'Outperform' recommendation on the stock.
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