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Is Brown-Forman (BF.B) Poised to Grow Despite Headwinds?
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Leading premium alcoholic beverages seller, Brown-Forman Corporation (BF.B - Free Report) commands a strong portfolio of globally recognized brands. Further, the company’s expansion endeavors and shareholder-friendly moves remain the corner stone of its success story. However, owing to its global operations, the company remains exposed to currency movements, which have been hurting results for quite some time now.
Notably, adverse currency movements hurt the company’s top-line growth for third-quarter fiscal 2017 by 2 percentage points. Moreover, it expects currency headwinds to persevere in fiscal 2017, which is expected to bear about 6 cents per share negative impact on earnings per share for fiscal 2017. Additionally, the company anticipates the unstable emerging market conditions and uncertain geopolitical environment to hurt fiscal 2017 results. Consequently, it trimmed underlying sales and earnings projections for fiscal 2017.
The persistent currency woes, along with tough economic conditions in emerging markets and soft travel retail network have also had a bearing on the stock performance. While the Brown-Forman stock rose 3% year to date, it has underperformed the Zacks categorized Beverages – Alcohol industry’s 8.6% growth.
Is this Just a Phase?
While the aforementioned facts display a dull story, we expect Brown-Forman’s continued focus on pricing, product innovation and expanding operations in emerging markets to boost operational performance and strengthen market position. The company plans to expand Jack Daniel's market share in the developed markets, such as France and the U.S., and in emerging markets 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 sphere of other brands, such as Jack Daniel's Tennessee Honey, Jack Daniels Fire, Gentleman Jack and Jack Daniel's Single Barrel within Jack Daniel’s.
Further, this Zacks Rank #3 (Hold) company is looking to enter the fastest-growing spirit category – the Irish Whiskey with the purchase of all shares of Slane Castle Irish Whiskey Limited in Ireland. In another development, it acquired two historic properties at West Main Street in Louisville, KY to boost Old Forester brand. Further, as part of portfolio management and prioritization of strategic brands, the company concluded the sale of Southern Comfort and Tuaca trademarks to Sazerac.
These moves highlight Brown-Forman’s focus on achieving growth through prudent expansions. The company also has a consistent record of returning cash to its shareholders through regular dividend payouts and share repurchases. This demonstrates Brown-Forman’s ability to boost earnings and cash flows over the long term, alongside underscoring its commitment toward shareholders.
Bottom Line
Brown-Forman’s outlook for fiscal 2017 definitely indicates a tough path ahead for the stock. However, we remain optimistic about the company’s growth as its initiatives look promising. Further, a robust worldwide demand for its authentic American whiskey brands, consumer interest in flavored whiskey and a growing trend in premium spirits, exhibit a scope for the company to prosper.
Compania Cervecerias has jumped nearly 27.9% year to date. Moreover, the company has witnessed positive estimate revisions in the last seven days.
Constellation Brands, with a long-term EPS growth rate of 17.8%, has grown 12.2% year to date.
Heineken has surged about 16.4% year to date. It has a long-term EPS growth rate of 7.6%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Is Brown-Forman (BF.B) Poised to Grow Despite Headwinds?
Leading premium alcoholic beverages seller, Brown-Forman Corporation (BF.B - Free Report) commands a strong portfolio of globally recognized brands. Further, the company’s expansion endeavors and shareholder-friendly moves remain the corner stone of its success story. However, owing to its global operations, the company remains exposed to currency movements, which have been hurting results for quite some time now.
Notably, adverse currency movements hurt the company’s top-line growth for third-quarter fiscal 2017 by 2 percentage points. Moreover, it expects currency headwinds to persevere in fiscal 2017, which is expected to bear about 6 cents per share negative impact on earnings per share for fiscal 2017. Additionally, the company anticipates the unstable emerging market conditions and uncertain geopolitical environment to hurt fiscal 2017 results. Consequently, it trimmed underlying sales and earnings projections for fiscal 2017.
The persistent currency woes, along with tough economic conditions in emerging markets and soft travel retail network have also had a bearing on the stock performance. While the Brown-Forman stock rose 3% year to date, it has underperformed the Zacks categorized Beverages – Alcohol industry’s 8.6% growth.
Is this Just a Phase?
While the aforementioned facts display a dull story, we expect Brown-Forman’s continued focus on pricing, product innovation and expanding operations in emerging markets to boost operational performance and strengthen market position. The company plans to expand Jack Daniel's market share in the developed markets, such as France and the U.S., and in emerging markets 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 sphere of other brands, such as Jack Daniel's Tennessee Honey, Jack Daniels Fire, Gentleman Jack and Jack Daniel's Single Barrel within Jack Daniel’s.
Further, this Zacks Rank #3 (Hold) company is looking to enter the fastest-growing spirit category – the Irish Whiskey with the purchase of all shares of Slane Castle Irish Whiskey Limited in Ireland. In another development, it acquired two historic properties at West Main Street in Louisville, KY to boost Old Forester brand. Further, as part of portfolio management and prioritization of strategic brands, the company concluded the sale of Southern Comfort and Tuaca trademarks to Sazerac.
These moves highlight Brown-Forman’s focus on achieving growth through prudent expansions. The company also has a consistent record of returning cash to its shareholders through regular dividend payouts and share repurchases. This demonstrates Brown-Forman’s ability to boost earnings and cash flows over the long term, alongside underscoring its commitment toward shareholders.
Bottom Line
Brown-Forman’s outlook for fiscal 2017 definitely indicates a tough path ahead for the stock. However, we remain optimistic about the company’s growth as its initiatives look promising. Further, a robust worldwide demand for its authentic American whiskey brands, consumer interest in flavored whiskey and a growing trend in premium spirits, exhibit a scope for the company to prosper.
Stocks to Consider
Better-ranked stocks in the same industry include Compania Cervecerias Unidas, S.A. (CCU - Free Report) and Constellation Brands Inc. (STZ - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), as well as Heineken NV (HEINY - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Compania Cervecerias has jumped nearly 27.9% year to date. Moreover, the company has witnessed positive estimate revisions in the last seven days.
Constellation Brands, with a long-term EPS growth rate of 17.8%, has grown 12.2% year to date.
Heineken has surged about 16.4% year to date. It has a long-term EPS growth rate of 7.6%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>