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Can Brown-Forman (BF.B) Overcome Hurdles in Growth Path?

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Brown-Forman Corporation (BF.B - Free Report) has been taking several measures to drive overall growth, including expansion of its operations, boosting shareholders’ wealth and solidifying its market position. This Zacks Rank #3 (Hold) company boasts a robust portfolio of globally recognized brands and is a major producer and distributor of premium alcoholic beverages in the world.

The company is looking to enter the fastest-growing spirit category, the Irish Whiskey, with the purchase of all the shares of Slane Castle Irish Whiskey Limited in Ireland. In another development, the company acquired two historic properties at West Main Street in Louisville, KY, in order to boost its Old Forester brand. In addition, as part of its portfolio management, the company concluded the sale of its Southern Comfort and Tuaca trademarks.

We believe that Brown-Forman’s continued focus on pricing, product innovation and expansion of its footprint in emerging markets should boost its operational performance, and in turn, market share. Additionally, the company expects to grow on the back of strong demand for its authentic American whiskey brands worldwide, consumer interest in flavored whiskey and a growing trend in premium spirits.

However, the company has been battling currency woes for a while now, along with tough economic conditions in emerging markets and soft travel retail network. These have been hurting its top line, which missed the Zacks Consensus Estimate in five of the seven past quarters.

Going forward, the company anticipates the perils of currency headwinds and unstable emerging market conditions along with an uncertain geopolitical environment to linger in fiscal 2017. Management reiterated its fiscal 2017 earnings guidance in the range of $1.71–$1.81 per share, which is expected to bear negative impact of 5 cents.

Nonetheless, estimates have been largely stable ahead of the company’s third-quarter fiscal 2017 earnings release. The Zacks Consensus Estimate for the current quarter and fiscal 2017 are pegged at 48 cents and $1.75, respectively.

A glimpse of the company’s share price history reveals that Brown-Forman has underperformed the Zacks categorized Beverages – Alcoholic industry in the past three months. The stock increased 3.7% compared with the industry’s growth of 5.8%, in the said time period. While its shares rose 6.8% in the past one month, the industry gained 2.5%.

Stocks that Warrant a Look

A better-ranked stock in the same industry is Constellation Brands, Inc. (STZ - Free Report) , which carries a Zacks Rank #2 (Buy) and has a long-term earnings growth rate of 19%. Also, the stock climbed 12.6% in the past one year.
Some other key picks in the broader Consumer Staples sector include Lamb Weston Holdings, Inc. (LW - Free Report) and Campbell Soup Company (CPB - Free Report) .

Lamb Weston Holdings has surged 31.4% in the past three months and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Campbell Soup carries a Zacks Rank #2 and has increased 18.3% in the past three months. Further, it has a long-term earnings growth rate of 5.6%.

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