Factors Likely to Influence Brown-Forman's (BF.B) Q1 Earnings

Brown-Forman Corporation (BF.B) is slated to release first-quarter fiscal 2022 results on Sep 1. The alcoholic beverage bigwig is likely to deliver revenue growth and flat year-over-year earnings in the to-be-reported quarter. The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $852.3 million, indicating an increase of 13.2% from that reported in the year-ago quarter.

The consensus mark for the to-be-reported quarter’s earnings is pegged at 40 cents per share, indicating no change from the year-ago period’s reported figure. Earnings estimates for the fiscal first quarter have moved up by a penny in the past seven days.

The company delivered an earnings beat of 4.7% in the last reported quarter. Moreover, its earnings outperformed the Zacks Consensus Estimate by 7.04%, on average, in the trailing four quarters.

BrownForman Corporation Price and EPS Surprise


BrownForman Corporation Price and EPS Surprise

BrownForman Corporation price-eps-surprise | BrownForman Corporation Quote

Key Factors to Note

Brown-Forman has been witnessing strong underlying sales trends, driven by gains across each of the three major International Monetary Fund geographic clusters (the United States, developed international and emerging markets). Strong demand for premium bourbons and Jack Daniel’s RTDs has been aiding sales growth in the United States. Higher volume and prices for tequilas, Herradura and el Jimador are other drivers.

The company’s first-quarter fiscal 2022 performance is expected to have benefited from its focus on investing in the diversification of its brand portfolio to drive growth. Its investments in brands center around broadening the Jack Daniel’s family of brands, while also exiting the weaker brands and expanding the fast-growing premium spirits categories.

The company has been investing in organically accelerating growth of two fast-growing spirit categories, bourbon and tequila. The Woodford Reserve and the Old Forester trademarks have been mainly driving growth of the bourbon category in the United States. The tequila portfolio in the United States has been gaining from the strong performance of the Herradura and el Jimador brands. The balanced investments in the portfolio are likely to have helped sustain the company’s track record of delivering consistent growth in the to-be-reported quarter.

On the last reported quarter’s earnings call, management pointed out that it is optimistic about the momentum throughout fiscal 2022 as the operating environment continues to improve. It expected to benefit from the strength of its markets and the reopening of the on-premise channel and pick-up in tourism. Gains from these factors are likely to get reflected in the company’s first-quarter fiscal 2022 results.

Brown-Forman’s stringent cost-management initiatives are expected to have partly aided the bottom line in the to-be-reported quarter.

However, soft margins and higher costs have been hurting the bottom line for the past few quarters. Higher input costs, lower fixed-cost absorption and unfavorable mix shifts to lower-priced brands are likely to have hurt the gross margin in the fiscal first quarter. Despite cost-management initiatives, higher SG&A expenses and advertising costs are expected to have led to operating expense deleverage in the fiscal first quarter.

While the company remains optimistic about the reopening of the on-premise channel and pick-up in tourism, the impacts on the on-premise and Travel Retail businesses are expected to have hurt the top line to some extent in the to-be-reported quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Brown-Forman this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Brown-Forman has a Zacks Rank #3 and an Earnings ESP of -7.04%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

lululemon athletica inc. LULU presently has an Earnings ESP of +3.06% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Mills, Inc. GIS currently has an Earnings ESP of +1.32% and a Zacks Rank #3.

Philip Morris International Inc. PM has an Earnings ESP of +0.45% and a Zacks Rank #3 at present.

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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.

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