Back to top

Analyst Blog

Brown-Forman Corporation’s (BF.B - Analyst Report) fiscal second quarter 2013 (ended October 31, 2012) earnings of 80 cents a share came ahead of the Zacks Consensus Estimate of 78 cents and jumped 11% from 73 cents reported in the comparable prior-year quarter.

However, net sales remained flat on a year-over-year basis at $1,013.8 million as adverse currency exchange rates and spin-off of Hopland wine business more than offset the positives from price increases and volume gains. On an underlying basis, the company’s net sales increased 6%. However, the quarterly sales were well above the Zacks Consensus Estimate of $788 million.

During the quarter, Brown-Forman’s gross profit increased 4% to $524.5 million from $501.9 million reported in the year-ago quarter, primarily due to lower input costs. Consequently, gross margin expanded 222 basis points (bps) to 51.7% compared with 49.5% in the prior-year period.

Selling, general, and administrative expenses (SG&A) increased 8% from the last quarter to $159.1, while SG&A as a percentage of sales increased 121 basis points to 15.7%. Advertising expenses remained flat at $106.6 million.

Operating profit during the quarter climbed 7% to $262.3 million from $246.3 million in the prior-year period, primarily driven by improved gross profit, partially offset by increased SG&A expenses. Consequently, operating margin expanded 157 bps to 25.9% compared with 24.3% in the year-ago quarter.

Balance Sheet & Cash Flow

Brown-Forman ended the quarter with cash and cash equivalents of $368.5 million and long-term debt of $501.4 million. Year-to-date, Brown-Forman generated $164.7 million of cash from operations and deployed $99.5 million for dividend payout.

Guidance Raised

Moving forward, Brown-Forman raised its outlook for fiscal 2013. It now expects fiscal 2013 earnings in the range of $2.58–$2.70 per share, up from its earlier guidance of $2.40–$2.67.

Also, the company anticipates gross margins to improve in fiscal 2013 and consequently raised its forecast for operating income. The company now expects operating income to increase in low double-digits. Moreover, underlying sales are expected to increase in high single-digit.

Currently, Brown-Forman, which competes with Beam Inc. (BEAM), Constellation Brands Inc. (STZ) and Diageo plc (DEO - Analyst Report), has a Zacks #1 Rank, implying a short-term ‘Strong Buy’ rating. However, we maintain a long-term ‘Neutral’ recommendation on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
PLANAR SYST… PLNR 4.48 +6.16%
BITAUTO HOL… BITA 81.71 +5.12%
CHINA BIOLO… CBPO 48.00 +3.49%
CTPARTNERS… CTP 16.49 +3.19%
STRATTEC SE… STRT 73.90 +3.15%