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Brown-Forman B (BF.B) Up 2.1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Brown-Forman B (BF.B - Free Report) . Shares have added about 2.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Brown-Forman B due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Brown-Forman Earnings Lag Q4 Estimates, Sales Beat
Brown-Forman has reported fourth-quarter fiscal 2023 results, wherein earnings missed the Zacks Consensus Estimate. Meanwhile, sales beat the consensus mark. Both metrics improved year over year, backed by the premiumization of its portfolio and aggressive brand investments.
In the fiscal fourth quarter, earnings per share (EPS) of 43 cents advanced 36% year over year but lagged the Zacks Consensus Estimate of 45 cents.
Net sales of $1,046 million beat the Zacks Consensus Estimate of $1,003 million. The top line increased 5% year over year on a reported basis. On an organic basis, net sales were up 4% from the prior-year level.
In the fourth quarter of fiscal 2023, Brown-Forman’s gross profit amounted to $635 million, up 2% year over year. On an organic basis, the gross profit rose 2%. Meanwhile, the gross margin contracted 220 basis points to 60.7%.
SG&A expenses of $201 million rose 4% year over year and 3% on an organic basis. Advertising expenses increased 5% year over year to $134 million for the fiscal fourth quarter. On an organic basis, advertising expenses advanced 3%.
The operating income advanced 21% year over year to $298 million on a reported basis. The organic operating income rose 3%. The operating margin of 28.5% expanded significantly from the 24.7% reported in the year-ago quarter.
Category-Wise & Channel-Wise Performance
In fiscal 2023, net sales increased 8% year over year to $4.2 billion and 10% on an organic basis. The rise was mainly driven by broad-based growth across all geographic regions and the Travel Retail channel on strong consumer demand and favorable price/mix, somewhat offset by currency headwinds.
Net sales for Jack Daniel’s family of brands were up 4% on a reported basis and 9% on an organic basis in fiscal 2023. The brand’s sales were driven by solid demand, higher pricing and the estimated increase in distributor inventories. The upside in sales was also driven by the strength in Jack Daniel’s Tennessee Whiskey in the international markets and the Travel Retail channel.
Premium bourbon brands reported sales growth of 23% and organic sales growth of 24% in fiscal 2023, driven by double-digit growth in Woodford Reserve and Old Forester. An estimated rise in distributor inventories, along with higher volumes and pricing, boosted sales for Woodford Reserve and Old Forester.
Jack Daniel’s RTDs/Ready-to-Pours benefited from the introduction of the Jack Daniel’s and Coca-Cola RTD, as well as the launch of Jack Daniel’s Bonded Tennessee Whiskey, resulting in year-over-year sales growth of 11% and 16% on an organic basis. New Mix reported sales growth of 53% and organic sales growth of 45%, driven by market share gains in Mexico, as well as higher volumes and prices.
Brown-Forman’s tequila portfolio witnessed year-over-year sales growth of 10% each on a reported basis and an organic basis. This was driven by double-digit sales growth for the el Jimador and Herradura brands. Sales increased 11% on a reported and 10% on an organic basis for the Herradura brand, driven by higher prices and volumes in Mexico, and volume growth in the United States partly due to an estimated increase in distributor inventories. el Jimador reported year-over-year sales growth of 13% on a reported basis and 14% on an organic basis, driven by growth across all geographic regions, particularly in the Emerging markets and the United States.
The company’s overall sales in the United States advanced 3% on a reported and organic basis. The rise was driven by volume gains for Woodford Reserve, owing to the rise in distributor inventories, and higher pricing across the Jack Daniel’s portfolio, as well as the launch of the Jack Daniel’s and Coca-Cola RTD. These were partly negated by lower volumes of Jack Daniel’s Tennessee Whiskey and Korbel California Champagne.
Meanwhile, the developed international market reported sales growth of 4%, with organic sales rising 10%. The improvement can be attributed to volume gains for Jack Daniel’s Tennessee Whiskey and Jack Daniel’s RTDs. Additionally, higher pricing for Jack Daniel’s Tennessee Whiskey has aided the results.
The emerging markets registered 18% net sales growth, whereas organic sales improved 24%. This was backed by the growth of Jack Daniel’s Tennessee Whiskey in the United Arab Emirates and Brazil, as well as the continued double-digit growth of New Mix in Mexico.
Net sales in the Travel Retail channel advanced 41% on a reported basis and 43% on an organic basis due to higher volumes for the majority of the portfolio, as travel trends continued to rebound.
Balance Sheet & Cash Flow
The company ended fiscal 2023 with cash and cash equivalents of $374 million and long-term debt of $2,678 million. Its total shareholders’ equity was $3,268 million. As of Apr 30, 2023, BF.B used about $1,355 million of cash for operating activities.
In fiscal 2023, the company returned nearly $378 million to stockholders via dividends. It has paid regular quarterly dividends for 79 consecutive years and raised the dividend for 39 consecutive years.
Outlook
Management has issued the fiscal 2024 view. It anticipates organic sales growth of 5-7% for fiscal 2024. The company remains optimistic about organic sales and organic operating income growth. BF.B predicts trends to normalize after two consecutive years of double-digit organic sales growth.
Based on the aforementioned assumptions, Brown-Forman expects the organic operating income to increase 6-8%, driven by lower supply-chain disruption costs, partly offset by continued input cost pressures. The effective tax rate is expected to be 21-23% for fiscal 2024. Capital expenditure is anticipated to be $250-$270 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Brown-Forman B has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Brown-Forman B has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Brown-Forman B (BF.B) Up 2.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Brown-Forman B (BF.B - Free Report) . Shares have added about 2.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Brown-Forman B due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Brown-Forman Earnings Lag Q4 Estimates, Sales Beat
Brown-Forman has reported fourth-quarter fiscal 2023 results, wherein earnings missed the Zacks Consensus Estimate. Meanwhile, sales beat the consensus mark. Both metrics improved year over year, backed by the premiumization of its portfolio and aggressive brand investments.
In the fiscal fourth quarter, earnings per share (EPS) of 43 cents advanced 36% year over year but lagged the Zacks Consensus Estimate of 45 cents.
Net sales of $1,046 million beat the Zacks Consensus Estimate of $1,003 million. The top line increased 5% year over year on a reported basis. On an organic basis, net sales were up 4% from the prior-year level.
In the fourth quarter of fiscal 2023, Brown-Forman’s gross profit amounted to $635 million, up 2% year over year. On an organic basis, the gross profit rose 2%. Meanwhile, the gross margin contracted 220 basis points to 60.7%.
SG&A expenses of $201 million rose 4% year over year and 3% on an organic basis. Advertising expenses increased 5% year over year to $134 million for the fiscal fourth quarter. On an organic basis, advertising expenses advanced 3%.
The operating income advanced 21% year over year to $298 million on a reported basis. The organic operating income rose 3%. The operating margin of 28.5% expanded significantly from the 24.7% reported in the year-ago quarter.
Category-Wise & Channel-Wise Performance
In fiscal 2023, net sales increased 8% year over year to $4.2 billion and 10% on an organic basis. The rise was mainly driven by broad-based growth across all geographic regions and the Travel Retail channel on strong consumer demand and favorable price/mix, somewhat offset by currency headwinds.
Net sales for Jack Daniel’s family of brands were up 4% on a reported basis and 9% on an organic basis in fiscal 2023. The brand’s sales were driven by solid demand, higher pricing and the estimated increase in distributor inventories. The upside in sales was also driven by the strength in Jack Daniel’s Tennessee Whiskey in the international markets and the
Travel Retail channel.
Premium bourbon brands reported sales growth of 23% and organic sales growth of 24% in fiscal 2023, driven by double-digit growth in Woodford Reserve and Old Forester. An estimated rise in distributor inventories, along with higher volumes and pricing, boosted sales for Woodford Reserve and Old Forester.
Jack Daniel’s RTDs/Ready-to-Pours benefited from the introduction of the Jack Daniel’s and Coca-Cola RTD, as well as the launch of Jack Daniel’s Bonded Tennessee Whiskey, resulting in year-over-year sales growth of 11% and 16% on an organic basis. New Mix reported sales growth of 53% and organic sales growth of 45%, driven by market share gains in Mexico, as well as higher volumes and prices.
Brown-Forman’s tequila portfolio witnessed year-over-year sales growth of 10% each on a reported basis and an organic basis. This was driven by double-digit sales growth for the el Jimador and Herradura brands. Sales increased 11% on a reported and 10% on an organic basis for the Herradura brand, driven by higher prices and volumes in Mexico, and volume growth in the United States partly due to an estimated increase in distributor inventories. el Jimador reported year-over-year sales growth of 13% on a reported basis and 14% on an organic basis, driven by growth across all geographic regions, particularly in the Emerging markets and the United States.
The company’s overall sales in the United States advanced 3% on a reported and organic basis. The rise was driven by volume gains for Woodford Reserve, owing to the rise in distributor inventories, and higher pricing across the Jack Daniel’s portfolio, as well as the launch of the Jack Daniel’s and Coca-Cola RTD. These were partly negated by lower volumes of Jack Daniel’s Tennessee Whiskey and Korbel California Champagne.
Meanwhile, the developed international market reported sales growth of 4%, with organic sales rising 10%. The improvement can be attributed to volume gains for Jack Daniel’s Tennessee Whiskey and Jack Daniel’s RTDs. Additionally, higher pricing for Jack Daniel’s Tennessee Whiskey has aided the results.
The emerging markets registered 18% net sales growth, whereas organic sales improved 24%. This was backed by the growth of Jack Daniel’s Tennessee Whiskey in the United Arab Emirates and Brazil, as well as the continued double-digit growth of New Mix in Mexico.
Net sales in the Travel Retail channel advanced 41% on a reported basis and 43% on an organic basis due to higher volumes for the majority of the portfolio, as travel trends continued to rebound.
Balance Sheet & Cash Flow
The company ended fiscal 2023 with cash and cash equivalents of $374 million and long-term debt of $2,678 million. Its total shareholders’ equity was $3,268 million. As of Apr 30, 2023, BF.B used about $1,355 million of cash for operating activities.
In fiscal 2023, the company returned nearly $378 million to stockholders via dividends. It has paid regular quarterly dividends for 79 consecutive years and raised the dividend for 39 consecutive years.
Outlook
Management has issued the fiscal 2024 view. It anticipates organic sales growth of 5-7% for fiscal 2024. The company remains optimistic about organic sales and organic operating income growth. BF.B predicts trends to normalize after two consecutive years of double-digit organic sales growth.
Based on the aforementioned assumptions, Brown-Forman expects the organic operating income to increase 6-8%, driven by lower supply-chain disruption costs, partly offset by continued input cost pressures. The effective tax rate is expected to be 21-23% for fiscal 2024. Capital expenditure is anticipated to be $250-$270 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Brown-Forman B has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Brown-Forman B has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.