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Brown-Forman Corporation (BF.B - Free Report) reported third-quarter fiscal 2017, wherein adjusted earnings of 47 cents a share rose 1% year over year but lagged the Zacks Consensus Estimate of 48 cents.
Net sales were almost flat with the year-ago quarter at $808 million, after deducting excise taxes. However, on an underlying basis (excluding negative currency impact and other adjustments), sales grew 4%. Moreover, the company’s sales, before accounting for excise taxes, came in at $1,059 million, down 2% from the prior-year figure of $1,083 million. The Zacks Consensus Estimate was pegged at $796.1 million.
Despite a tough consumer staples backdrop, the company’s underlying sales growth in quarter was relatively better than first-half fiscal 2017. Net sales were hurt by the persistence of currency headwinds, tough economic conditions in emerging markets and the divestiture of Southern Comfort and Tuaca in fiscal 2016. However, the company’s robust underlying performance came on the back of strong portfolio of premium American whiskey brands, along with its Jack Daniel’s trademark.
Brown-Forman closed trade at $48.48 per share on Mar 6, falling a marginal 1% from the previous day. However, Brown-Forman has outperformed the Zacks categorized Beverages–Alcoholic industry, with its shares rising 3.6% in the last six months, compared with the industry’s decline of 7.9%.
Quarter in Detail
Brown-Forman’s gross profit declined 3% to $536 million, while gross margin contracted 230 basis points (bps) to 66.3%.
Selling, general and administrative expenses dipped 3% from the year-ago quarter figure to $162 million. Further, advertising expenses fell 4% year over year to $102 million.
However, the fall in operating expenses was not enough to offset the fall in gross profit. Consequently, operating income dropped 2% to $273 million, with operating margin contracting 60 bps to 33.8%. On an underlying basis, operating income of this Zacks Rank #3 (Hold) company increased 3%.
Balance Sheet & Cash Flow
Brown-Forman ended the quarter with cash and cash equivalents of $197 million, and long-term debt of $1,669 million. The company’s total shareholders’ equity was $1,184 million as of Jan 31, 2017.
During the nine months of fiscal 2017, the company generated $445 million of cash from operations.
On Jan 24, 2017, the company declared a regular quarterly dividend of 18.25 cents per share on Class A and Class B shares. The dividend is payable on Apr 3, 2017, to shareholders on record as of Mar 6.
Additionally, Brown-Forman bought back about 11.8 million shares for $561 million in the nine months of fiscal 2017. With this, as of Jan 31, 2017, the company has authorization worth $330 million remaining under its current stock repurchase plan.
Fiscal 2017 Guidance
While the company expects the perils of currency headwinds, as well as the uncertain global economic and geopolitical environment to linger, it remains confident of persistent growth in underlying net sales and operating income in fiscal 2017.
Going forward, the company expects the favorable underlying sales growth comparisons compared with the first half that were witnessed in the fiscal third quarter to continue into the fiscal fourth quarter. However, the company now expects fiscal 2017 underlying sales to be at the lower end of the previously stated guidance. Management now projects 3–4% growth in underlying sales compared with the previous forecast of 4–5% increase.
Further, underlying operating income is anticipated to increase in range of 5–7% compared with a 6–8% growth expected earlier.
Based on the aforementioned estimates and 6 cents negative influence from foreign currency headwinds, the company lowered the higher end of fiscal 2017 earnings guidance. The company now estimates earnings per share in the range of $1.71–$1.76 compared with $1.71–$1.81 guided previously.
Brown Forman Corporation Price, Consensus and EPS Surprise
Pernod Ricard has jumped 8.5% in the last three months. The company has a long-term earnings growth rate of 6%.
Tsingtao Brewery, with a long-term earnings growth rate of 12.8%, has surged 17.3% in the past six months.
Ambev has gained nearly 11.2% in the last three months. Moreover, it has a long-term earnings growth rate of 3%.
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Brown-Forman (BF.B) Q3 Earnings Lag, Tepid View Issued
Brown-Forman Corporation (BF.B - Free Report) reported third-quarter fiscal 2017, wherein adjusted earnings of 47 cents a share rose 1% year over year but lagged the Zacks Consensus Estimate of 48 cents.
Net sales were almost flat with the year-ago quarter at $808 million, after deducting excise taxes. However, on an underlying basis (excluding negative currency impact and other adjustments), sales grew 4%. Moreover, the company’s sales, before accounting for excise taxes, came in at $1,059 million, down 2% from the prior-year figure of $1,083 million. The Zacks Consensus Estimate was pegged at $796.1 million.
Despite a tough consumer staples backdrop, the company’s underlying sales growth in quarter was relatively better than first-half fiscal 2017. Net sales were hurt by the persistence of currency headwinds, tough economic conditions in emerging markets and the divestiture of Southern Comfort and Tuaca in fiscal 2016. However, the company’s robust underlying performance came on the back of strong portfolio of premium American whiskey brands, along with its Jack Daniel’s trademark.
Brown-Forman closed trade at $48.48 per share on Mar 6, falling a marginal 1% from the previous day. However, Brown-Forman has outperformed the Zacks categorized Beverages–Alcoholic industry, with its shares rising 3.6% in the last six months, compared with the industry’s decline of 7.9%.
Quarter in Detail
Brown-Forman’s gross profit declined 3% to $536 million, while gross margin contracted 230 basis points (bps) to 66.3%.
Selling, general and administrative expenses dipped 3% from the year-ago quarter figure to $162 million. Further, advertising expenses fell 4% year over year to $102 million.
However, the fall in operating expenses was not enough to offset the fall in gross profit. Consequently, operating income dropped 2% to $273 million, with operating margin contracting 60 bps to 33.8%. On an underlying basis, operating income of this Zacks Rank #3 (Hold) company increased 3%.
Balance Sheet & Cash Flow
Brown-Forman ended the quarter with cash and cash equivalents of $197 million, and long-term debt of $1,669 million. The company’s total shareholders’ equity was $1,184 million as of Jan 31, 2017.
During the nine months of fiscal 2017, the company generated $445 million of cash from operations.
On Jan 24, 2017, the company declared a regular quarterly dividend of 18.25 cents per share on Class A and Class B shares. The dividend is payable on Apr 3, 2017, to shareholders on record as of Mar 6.
Additionally, Brown-Forman bought back about 11.8 million shares for $561 million in the nine months of fiscal 2017. With this, as of Jan 31, 2017, the company has authorization worth $330 million remaining under its current stock repurchase plan.
Fiscal 2017 Guidance
While the company expects the perils of currency headwinds, as well as the uncertain global economic and geopolitical environment to linger, it remains confident of persistent growth in underlying net sales and operating income in fiscal 2017.
Going forward, the company expects the favorable underlying sales growth comparisons compared with the first half that were witnessed in the fiscal third quarter to continue into the fiscal fourth quarter. However, the company now expects fiscal 2017 underlying sales to be at the lower end of the previously stated guidance. Management now projects 3–4% growth in underlying sales compared with the previous forecast of 4–5% increase.
Further, underlying operating income is anticipated to increase in range of 5–7% compared with a 6–8% growth expected earlier.
Based on the aforementioned estimates and 6 cents negative influence from foreign currency headwinds, the company lowered the higher end of fiscal 2017 earnings guidance. The company now estimates earnings per share in the range of $1.71–$1.76 compared with $1.71–$1.81 guided previously.
Brown Forman Corporation Price, Consensus and EPS Surprise
Brown Forman Corporation Price, Consensus and EPS Surprise | Brown Forman Corporation Quote
Stocks to Consider
Some better-ranked stocks in the same industry include Pernod Ricard SA , sporting a Zacks Rank #1 (Strong Buy), Tsingtao Brewery Company Limited (TSGTY - Free Report) and Ambev S.A. (ABEV - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Pernod Ricard has jumped 8.5% in the last three months. The company has a long-term earnings growth rate of 6%.
Tsingtao Brewery, with a long-term earnings growth rate of 12.8%, has surged 17.3% in the past six months.
Ambev has gained nearly 11.2% in the last three months. Moreover, it has a long-term earnings growth rate of 3%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>