) 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
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.
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
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
Constellation Brands Inc
), has a Zacks #1 Rank, implying a short-term 'Strong Buy'
rating. However, we maintain a long-term 'Neutral' recommendation
on the stock.
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