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Brown-Forman (BF.B) Declines as Q4 Earnings Lag Estimates
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Brown-Forman Corporation (BF.B - Free Report) reported fourth-quarter fiscal 2017, wherein adjusted earnings of 38 cents lagged both the year-ago figure and the Zacks Consensus Estimate of 40 cents.
Net sales declined 4.8% year over year to $694 million, after deducting excise taxes. However, on an underlying basis (excluding negative currency impact and other adjustments), sales increased 4%. Moreover, the company’s sales, before accounting for excise taxes, came in at $887 million, down 4.9% from the prior-year figure of $933 million. The Zacks Consensus Estimate was pegged at $736.4 million.
Brown Forman Corporation Price, Consensus and EPS Surprise
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 declined nearly 1% in the pre-market trading session following the earnings release. However, Brown-Forman shares have risen 2.1% in the last one year, outperforming the Zacks categorized Beverages–Alcohol industry’s increase of 0.9%.
Quarter in Detail
Brown-Forman’s gross profit decreased 1% to $480 million, while gross margin contracted 120 basis points (bps) to 69.1%. However, underlying gross profit improved 4%.
Selling, general and administrative (SG&A) expenses dipped 1% from the year-ago quarter figure to $179 million. However, SG&A expenses increased 1% on an underlying basis. Further, advertising expenses fell 9% year over year to $91 million, while underlying advertising costs dipped 9%.
However, the fall in operating expenses was not enough to offset the fall in gross profit. Consequently, operating income plummeted 71% to $212 million, with operating margin contracting substantially to 30.5% from 99.5% in the year-ago quarter. On an underlying basis, operating income of this Zacks Rank #2 (Buy) company increased 13%.
Balance Sheet & Cash Flow
Brown-Forman ended fiscal 2017 with cash and cash equivalents of $182 million, long-term debt of $1,689 million and total debt of $2,149 million. The company’s total shareholders’ equity was $1,370 million as of Apr 30, 2017.
In fiscal 2017, the company generated $639 million cash from operating activities.
On May 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 Jul 3, 2017, to shareholders on record as of Jun 5.
In fiscal 2017, Brown-Forman bought back about 11.9 million Class A and Class B shares for $561 million. On combining the share repurchases and $274 million worth dividends paid, the company returned a total of $835 million to shareholders in fiscal 2017.
Fiscal 2018 Guidance
While the company expects the perils of currency headwinds, as well as the volatile global economic and geopolitical environment to linger, it remains confident of persistent growth in underlying net sales and operating income in fiscal 2018.
Management projects 4–5% growth in underlying sales mainly backed by the Jack Daniel's family of brands, its premium bourbon and tequila brands. Further, growth is likely to come from new product launches including the Jack Daniel's Tennessee Rye and Slane Irish Whiskey, alongside the seeding of single malt scotch brands.
Underlying operating income is anticipated to increase in range of 6–8%. Further, the company estimates earnings per share in the range of $1.80–$1.90, including a modest negative influence from foreign currency headwinds, higher tax rate and the establishment of owned distribution center in Spain.
Moreover, the company expects three year cost savings of $100 million (FY18-FY20) driven by better leveraging prior investments, such as production capabilities, route to market initiatives, brand innovation, homeplace assets, and its employees.
Other Stocks to Consider
Some other top-ranked stocks in the same industry include Compania Cervecerias Unidas S.A. (CCU - Free Report) and Craft Brew Alliance Inc. , both sporting a Zacks Rank #1 (Strong Buy), as well as Constellation Brands Inc. (STZ - Free Report) , carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Compania Cervecerias Unidas has jumped nearly 27.8% year to date. Also, the company’s estimates for the current fiscal have witnessed uptrend in the last 30 days.
Craft Brew Alliance has surged 19.9% in the last three months. Also, the company’s estimates for the current fiscal have witnessed positive estimate revisions in the last 30 days.
Constellation Brands has gained nearly 21.9% year to date. Moreover, it has a long-term earnings growth rate of 17.8%.
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At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >>
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Brown-Forman (BF.B) Declines as Q4 Earnings Lag Estimates
Brown-Forman Corporation (BF.B - Free Report) reported fourth-quarter fiscal 2017, wherein adjusted earnings of 38 cents lagged both the year-ago figure and the Zacks Consensus Estimate of 40 cents.
Net sales declined 4.8% year over year to $694 million, after deducting excise taxes. However, on an underlying basis (excluding negative currency impact and other adjustments), sales increased 4%. Moreover, the company’s sales, before accounting for excise taxes, came in at $887 million, down 4.9% from the prior-year figure of $933 million. The Zacks Consensus Estimate was pegged at $736.4 million.
Brown Forman Corporation Price, Consensus and EPS Surprise
Brown Forman Corporation Price, Consensus and EPS Surprise | Brown Forman Corporation Quote
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 declined nearly 1% in the pre-market trading session following the earnings release. However, Brown-Forman shares have risen 2.1% in the last one year, outperforming the Zacks categorized Beverages–Alcohol industry’s increase of 0.9%.
Quarter in Detail
Brown-Forman’s gross profit decreased 1% to $480 million, while gross margin contracted 120 basis points (bps) to 69.1%. However, underlying gross profit improved 4%.
Selling, general and administrative (SG&A) expenses dipped 1% from the year-ago quarter figure to $179 million. However, SG&A expenses increased 1% on an underlying basis. Further, advertising expenses fell 9% year over year to $91 million, while underlying advertising costs dipped 9%.
However, the fall in operating expenses was not enough to offset the fall in gross profit. Consequently, operating income plummeted 71% to $212 million, with operating margin contracting substantially to 30.5% from 99.5% in the year-ago quarter. On an underlying basis, operating income of this Zacks Rank #2 (Buy) company increased 13%.
Balance Sheet & Cash Flow
Brown-Forman ended fiscal 2017 with cash and cash equivalents of $182 million, long-term debt of $1,689 million and total debt of $2,149 million. The company’s total shareholders’ equity was $1,370 million as of Apr 30, 2017.
In fiscal 2017, the company generated $639 million cash from operating activities.
On May 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 Jul 3, 2017, to shareholders on record as of Jun 5.
In fiscal 2017, Brown-Forman bought back about 11.9 million Class A and Class B shares for $561 million. On combining the share repurchases and $274 million worth dividends paid, the company returned a total of $835 million to shareholders in fiscal 2017.
Fiscal 2018 Guidance
While the company expects the perils of currency headwinds, as well as the volatile global economic and geopolitical environment to linger, it remains confident of persistent growth in underlying net sales and operating income in fiscal 2018.
Management projects 4–5% growth in underlying sales mainly backed by the Jack Daniel's family of brands, its premium bourbon and tequila brands. Further, growth is likely to come from new product launches including the Jack Daniel's Tennessee Rye and Slane Irish Whiskey, alongside the seeding of single malt scotch brands.
Underlying operating income is anticipated to increase in range of 6–8%. Further, the company estimates earnings per share in the range of $1.80–$1.90, including a modest negative influence from foreign currency headwinds, higher tax rate and the establishment of owned distribution center in Spain.
Moreover, the company expects three year cost savings of $100 million (FY18-FY20) driven by better leveraging prior investments, such as production capabilities, route to market initiatives, brand innovation, homeplace assets, and its employees.
Other Stocks to Consider
Some other top-ranked stocks in the same industry include Compania Cervecerias Unidas S.A. (CCU - Free Report) and Craft Brew Alliance Inc. , both sporting a Zacks Rank #1 (Strong Buy), as well as Constellation Brands Inc. (STZ - Free Report) , carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Compania Cervecerias Unidas has jumped nearly 27.8% year to date. Also, the company’s estimates for the current fiscal have witnessed uptrend in the last 30 days.
Craft Brew Alliance has surged 19.9% in the last three months. Also, the company’s estimates for the current fiscal have witnessed positive estimate revisions in the last 30 days.
Constellation Brands has gained nearly 21.9% year to date. Moreover, it has a long-term earnings growth rate of 17.8%.
3 Stocks to Ride a 588% Revenue Explosion
At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >>