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Can Brown-Forman's Solid Brand Line-Up Sustain Growth?

Brown-Forman Corp.BF.B , the world's leading producer and distributor of premium alcoholic beverages, has time and again proven its worth given its portfolio of over 25 premium brands, including Jack Daniel's - its flagship spirits brand - along with Southern Comfort liqueur, Canadian Mist whiskey, Finlandia vodka as well as the Fetzer and Korbel wine brands. Shares of the company witnessed 17.6% growth year to date.

Further, Brown-Forman's constant focus on pricing, product innovation and expansion strengthen its market position. The company plans to drive traction for Jack Daniel's in both developed markets such as France and the U.S. and emerging ones like Russia, Poland, and Mexico, where the whiskey category is in the early stages of development.

The company is also on track to expand the range of its other brands, such as Jack Daniel's Tennessee Honey, Jack Daniels Fire, Gentleman Jack and Single Barrel. Furthermore, the company is looking to enter the fastest-growing spirit category - the Irish Whiskey - as evident from its recent purchase of Slane Castle Irish Whiskey Limited in Ireland. In another stride, Brown-Forman acquired two historic properties at West Main Street in Louisville, KY to boost its Old Forester brand.

Meanwhile, Brown-Forman reported lower-than-expected second-quarter fiscal 2016 earnings impacted by soft sales, which were offset by a decline in operating expenses. The top line mainly mirrored the impact of the ongoing currency headwinds. However, the company reported strong underlying results buoyed by its strong portfolio of premium American whiskey brands along with its trademark Jack Daniel's and balanced geographic growth.

Further, the company indicated that the uncertain global economic environment and its impact on businesses have made it difficult to make future projections. Though the company reiterated its earnings outlook for fiscal 2016, it expects currency headwinds to linger throughout the fiscal, weighing somewhat on its results. These factors raise concerns about the company's future performance.

Consequently, the Zacks Consensus Estimate for fiscal 2016 and 2017 witnessed a downtrend over the last 30 days. The estimate for fiscal 2016 is down 1.1% to $3.45 per share, while the estimate for fiscal 2017 fell by 1% to $3.79 per share.

Also, stiff competition and risks arising from operations in overseas markets may impact the company's performance. This Zacks Rank #3 (Hold) company is also prone to a probable increase in excise taxes that may hurt its bottom line.

Stocks to Consider

A better-ranked stock in the beverages-alcohol space is Constellation Brands Inc. STZ , with a Zacks Rank #2 (Buy). Some favorably ranked stocks in the related beverages-soft drinks industry are Primo Water Corporation PRMW , with a Zacks Rank #1 (Strong Buy), and Dr Pepper Snapple Group Inc. DPS , holding a Zacks Rank #2.

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BROWN FORMAN B (BF.B): Free Stock Analysis Report

DR PEPPER SNAPL (DPS): Free Stock Analysis Report

CONSTELLATN BRD (STZ): Free Stock Analysis Report

PRIMO WATER CP (PRMW): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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