Brown-Forman (BF.B) Q1 Earnings Rise Y/Y but Miss Estimates - Analyst Blog


Brown-Forman Corporation ( BF.B ) came up with mixed results for the first quarter of fiscal 2015, wherein its top and bottom lines witnessed an year-over-year growth but fell shy of the Zacks Consensus Estimate.

The company's earnings of 70 cents per share for the quarter were nearly 6.1% higher than the year-ago quarter but fell short of the Zacks Consensus Estimate of 73 cents. Brown-Forman has blamed lower-than-expected sales for the earnings miss.

Net sales for the fourth quarter increased 3% year over year to $921 million. Moreover, after deducting excise taxes, sales came in at $705 million, up 2.8% from the prior-year figure of $686 million. The Zacks Consensus Estimate for the quarter was $703 million.

The company revealed that the sales growth for the quarter were lower than the year-ago period. The first quarter of fiscal 2014 had mainly benefited from the huge inventory build up by distributors and retailers due to price increase.

Quarter in Detail

In the quarter, Brown-Forman's gross profit increased 4% to $495 million from $477 million in the year-ago comparable quarter, primarily due to lower cost of sales. Consequently, gross margin improved 40 basis points (bps) to 53.7%.

Selling, general and administrative expenses (SG&A) increased 9% from the year-ago quarter to $170 million while advertising expenses decreased 4% year over year to $99 million.

Operating profit marginally improved year over year to $214 million from $211 million in the prior-year period. However, operating margin contracted 30 bps to 23.9% from 24.2% in the year-ago quarter as the benefit from improved gross margin was more than offset by higher operating expenses as a percentage of net sales.

Balance Sheet & Cash Flow

Brown-Forman ended the quarter with cash and cash equivalents of $460 million and long-term debt of $998 million. During first quarter, Brown-Forman generated $112 million of cash from operations, against $93 million in the previous quarter. During the quarter, the company returned $74 million to shareholders through dividend payments of $62 million and share repurchase worth $12 million.

Reaffirms Fiscal 2015 Guidance

Though Brown-Forman started fiscal 2015 on a soft note, the company remains optimistic about the rest of the fiscal 2015. Therefore, it has reaffirmed its fiscal guidance range of 6% to 8% growth in underlying as well as reported sales.

Moreover, operating income is still expected to increase in the band of 9% to 11% on an underlying as well as reported basis. The company also continues to project earnings in the band of $3.25 to $3.45 per share for fiscal 2015. Currently, the Zacks Consensus Estimate for Brown-Forman stands at $3.36 per share.

Other Stocks to Consider

Currently, Brown-Forman carries a Zacks Rank #3 (Hold). Some better-placed stocks in the beverages-alcohol industry are Anheuser-Busch InBev SA/NV ( BUD ), Constellation Brands Inc. ( STZ ) and Molson Coors Brewing Co. ( TAP ), all carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: STZ , TAP , BUD

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