We have maintained our long-term Neutral recommendation on
), with a target price of $75.00.
Brown-Forman is one of the leading producers and distributors of
premium alcoholic beverages in the world and commands a strong
portfolio of globally-recognized brands. The company's portfolio
consists of more than 25 premium brands, including Jack Daniel's
-the flagship spirits brand - followed by Southern Comfort
liqueur, Canadian Mist whiskey, Finlandia vodka as well as Fetzer
and Korbel wine brands.
We remain impressed with the company's strong organic revenue
growth and management guidance. We believe that Brown-Forman's
consistent focus on developing its premium Jack Daniel's brand
through innovation and packaging changes has paid off, making it
a thriving company.
Apart from expanding the market share of its flagship Jack
Daniel's in developed and emerging markets, the company seeks to
expand the sphere of other brands, such as Gentleman Jack, Jack
Daniel's Single Barrel and Jack Daniel's ready-to-drink within
the Jack Daniel's brand.
Moreover, we expect the company's pricing strategy, product
innovation, and penetration into emerging markets to boost
operational performance and bolster its well-established position
in the market.
However, disappointing fiscal first-quarter 2014 earnings results
on the back of higher input costs and increase in operating
expenses have hurt investor sentiments. On a positive note,
however, the company reaffirmed its fiscal-2014 outlook, still
projecting earnings in the range of $2.80-$3.00 per share, a
9%-11% increase in operating income and a high-single-digit rise
Other impediments for the stock include stiff competition from
other alcoholic beverage companies, such as
) along with the potential risk of operating in overseas market
may have an adverse effect on Brown-Forman's financial
performance. Moreover, we caution that any increase in excise tax
may adversely affect the company's financial performance as
distilled spirits are subject to excise tax in various countries.
Other Stocks Worth Considering
Brown-Forman holds a Zacks Rank #4 (Sell). Stocks worth
considering in the alcoholic beverage industry are
Boston Beer Co. Inc.
Constellation Brands Inc.
). Boston Beer holds a Zacks Rank #1 (Strong Buy) while
Constellation Brands has a Zacks Rank #2 (Buy).
BROWN FORMAN B (BF.B): Free Stock Analysis
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CONSTELLATN BRD (STZ): Free Stock Analysis
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