Brown-Forman Corporation
's (
BF.B
) fiscal second quarter 2013 (ended October 31, 2012) earnings of
80 cents a share came ahead of the Zacks Consensus Estimate of 78
cents and jumped 11% from 73 cents reported in the comparable
prior-year quarter.
However, net sales remained flat on a year-over-year basis at
$1,013.8 million as adverse currency exchange rates and spin-off
of Hopland wine business more than offset the positives from
price increases and volume gains. On an underlying basis, the
company's net sales increased 6%. However, the quarterly sales
were well above the Zacks Consensus Estimate of $788 million.
During the quarter, Brown-Forman's gross profit increased 4%
to $524.5 million from $501.9 million reported in the year-ago
quarter, primarily due to lower input costs. Consequently, gross
margin expanded 222 basis points (bps) to 51.7% compared with
49.5% in the prior-year period.
Selling, general, and administrative expenses (SG&A)
increased 8% from the last quarter to $159.1, while SG&A as a
percentage of sales increased 121 basis points to 15.7%.
Advertising expenses remained flat at $106.6 million.
Operating profit during the quarter climbed 7% to $262.3
million from $246.3 million in the prior-year period, primarily
driven by improved gross profit, partially offset by increased
SG&A expenses. Consequently, operating margin expanded 157
bps to 25.9% compared with 24.3% in the year-ago quarter.
Balance Sheet & Cash Flow
Brown-Forman ended the quarter with cash and cash equivalents
of $368.5 million and long-term debt of $501.4 million.
Year-to-date, Brown-Forman generated $164.7 million of cash from
operations and deployed $99.5 million for dividend payout.
Guidance Raised
Moving forward, Brown-Forman raised its outlook for fiscal
2013. It now expects fiscal 2013 earnings in the range of
$2.58-$2.70 per share, up from its earlier guidance of
$2.40-$2.67.
Also, the company anticipates gross margins to improve in
fiscal 2013 and consequently raised its forecast for operating
income. The company now expects operating income to increase in
low double-digits. Moreover, underlying sales are expected to
increase in high single-digit.
Currently, Brown-Forman, which competes with
Beam Inc
.
(
BEAM
),
Constellation Brands Inc
.
(
STZ
) and
Diageo plc
(
DEO
), has a Zacks #1 Rank, implying a short-term 'Strong Buy'
rating. However, we maintain a long-term 'Neutral' recommendation
on the stock.
BROWN FORMAN B (BF.B): Free Stock Analysis
Report
DIAGEO PLC-ADR (DEO): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research