Brown-Forman Corporation
(
BF.B
), one of the leading producers and distributors of premium
alcoholic beverages in the world, is scheduled to report its
fourth-quarter and fiscal 2012 financial results before the opening
bell on June 6, 2012.
The current Zacks Consensus Estimate for the quarter is 76 cents
per share. For the quarter under review, revenue is expected to be
$805 million, according to the Zacks Consensus Estimate.
For fiscal 2012, the Zacks Consensus Estimate stands at $3.59
per share while revenue is expected to be $3,453 million.
Third-Quarter 2012 - A Synopsis
Brown-Forman reported earnings of 93 cents per share for
third-quarter 2012, missing the Zacks Consensus Estimate of $1.00
and declined approximately 3.1% from the year-ago earnings of 96
cents. Higher input and fuel costs coupled with increased operating
expenses affected the company's bottom line.
Brown-Forman's net sales remained almost flat year over year at
$959 million. As per the company, the distributors piled up the
inventories in anticipation of a price rise during the second
quarter, which was the main reason for flat third-quarter
sales.
Guidance for Fiscal 2012
In anticipation of a solid improvement in consumer trends during
the last quarter of fiscal 2012, Brown-Forman expects high-single
digit growth in net sales and operating income. However, it
anticipates that the stronger U.S. dollar value may have an adverse
impact on its bottom line. Accordingly, the company narrowed its
earnings guidance range at the time of third-quarter earnings
release. Currently, Brown-Forman expects fiscal 2012 earnings in
the range of $3.50 to $3.65 per share instead of $3.45 to
$3.70.
Zacks Consensus
The analysts following the stock expect Brown-Forman to post
fourth-quarter 2012 earnings of 76 cents a share, lower than 80
cents delivered in the prior-year quarter. Currently, the Zacks
Consensus Estimate ranges between 71 cents and 77 cents a
share.
For fiscal 2012, the Zacks Consensus Estimate stands at $3.59
per share, higher than the year-ago fiscal earnings of $3.57. The
current Zacks Consensus Estimate ranges between $3.55 and $3.60 per
share.
Agreement of Estimate
For the fourth quarter of fiscal 2012, of the 7 analysts
covering the stock, only 1 analyst revised its estimates upward,
while none have revised their estimates in the downward direction,
over the last 30 days. For full fiscal 2012, 1 analyst revised
their estimate downward, while none revised in the opposite
direction, in the last 30 days.
In the last 7 days, no movement in estimates has been noticed in
either direction either for fourth-quarter 2012 or fiscal 2012.
Magnitude of Estimate Revisions
The magnitude of estimate revisions for Brown-Forman depicts a
neutral outlook for the upcoming fourth quarter and fiscal 2012.
Over the last 7 days, estimates for the upcoming quarter and fiscal
2012 have remained unchanged at 76 cents and $3.59 per share,
respectively.
However, in the last 30 days, estimates for the upcoming fourth
quarter moved up by a penny to 76 cents per share while they remain
unchanged at $3.59 for fiscal 2012.
Surprise History
With respect to earnings surprises, Brown-Forman has missed as
well as topped the Zacks Consensus Estimate over the last four
quarters in the range of negative 7% to positive 25%. The average
remained a positive 5.2%. This suggests that Brown-Forman has
surpassed the Zacks Consensus Estimate by an average of 5.2% in the
trailing four quarters.
Our Recommendation
Brown-Forman is one of the leading producers and distributors of
premium alcoholic beverages in the world. The company commands a
strong portfolio of globally recognized brands, such as Jack
Daniel's, Finlandia, Southern Comfort and Canadian Mist. We believe
this provides a competitive edge to the company and bolsters its
well-established position in the market.
Moreover, we believe Brown-Forman's strategy of expanding Jack
Daniel's market share in developed markets, such as France and the
U.S., and emerging markets including Russia, Poland and Mexico,
where the whiskey category is in early stages of development will
boost its top line.
However, apart from macroeconomic headwinds, distilled spirits
are subject to excise tax in various countries. Rising fiscal
pressure in the U.S., European and many emerging markets may lead
to increasing risk of a potential excise tax on spirits by the
governments of respective countries. The effect of any excise tax
increase in future may have an adverse effect on Brown-Forman's
financial performance.
Above all, the company faces intense competition from other
well-established players in the industry, including
Beam Inc.
(
BEAM
),
Constellation Brands Inc.
(
STZ
) and
Diageo plc
(
DEO
). Moreover, Brown-Forman also encounters competition from local
and regional players in the respective countries. Consequently,
this may dent the company's future operating performance.
Currently, Brown-Forman has a Zacks #4 Rank, which implies a
short-term Sell rating. However, we maintain a long-term Neutral
recommendation on the stock.
BEAM INC (BEAM): Free Stock Analysis Report
BROWN FORMAN B (BF.B): Free Stock Analysis
Report
DIAGEO PLC-ADR (DEO): Free Stock Analysis
Report
CONSTELLATN BRD (STZ): Free Stock Analysis
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