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Brown-Forman's Q2 Earnings Miss Estimates, Gross Margin Expands Y/Y
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Key Takeaways
Brown-Forman posted lower EPS and sales, with revenues beating estimates year over year.
BF.B saw mixed market performance, with U.S. and Developed International declines.
Brown-Forman raised its dividend and reaffirmed guidance amid a tough backdrop.
Brown-Forman Corporation (BF.B - Free Report) has reported mixed second-quarter fiscal 2026 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line missed the same. Both sales and earnings declined year over year. The fiscal second-quarter results highlight the decisive actions the company has taken to strengthen its business amid a challenging environment. With superior innovation and bold route-to-consumer strategies, it has built resilience to navigate persistent headwinds.
In the fiscal second quarter, earnings per share (EPS) of 47 cents fell 14% year over year and lagged the Zacks Consensus Estimate of 48 cents.
Net sales of $1.036 billion declined 5% on a reported basis but beat the Zacks Consensus Estimate of $1.027 billion. On an organic basis, net sales dipped 2% from the prior-year period.
This Zacks Rank #3 (Hold) company’s shares have risen 4.1% in the past three months against the industry’s 2.4% drop.
Brown-Forman’s Margins & Expenses
In the fiscal second quarter, BF.B’s gross profit of $615 million declined 5% year over year on a reported and 4% on an organic basis. However, the gross margin expanded 20 basis points (bps) to 59.3%, aided by the effect of acquisitions and divestitures. This gain was partly offset by higher costs and unfavorable price/mix.
Selling, general and administrative (SG&A) expenses of $187 million were almost flat year over year, primarily driven by reduced compensation and benefit-related expenses.
Brown-Forman Corporation Price, Consensus and EPS Surprise
Operating income decreased 10% year over year to $305 million on a reported basis and fell 9% on an organic basis. The operating margin of 29.4% contracted 170 bps from 31.1% reported in the year-ago quarter.
Understanding Brown-Forman’s Market Performance
In the first-half fiscal 2026, net sales in the United States decreased 9% year over year on a reported basis and were flat on an organic basis, reflecting the end of the Korbel relationship and the absence of the Sonoma-Cutrer prior-year TSA, and lower volumes of Jack Daniel’s Tennessee Whiskey, Herradura and Jack Daniel’s Tennessee Honey. Such declines were partly offset by the launch of Jack Daniel’s Tennessee Blackberry and increased net sales across the portfolio owing to changes to its distributor relationship terms.
In a challenging economic landscape, net sales in the Developed International markets dipped 4% on a reported basis and 6% on an organic basis, despite sequential improvement. The decrease was led by the absence of American-made beverage alcohol from retail shelves in the majority of the Canadian provinces and reduced volumes of Jack Daniel’s Tennessee Whiskey in Germany and the United Kingdom. The decline was partly offset by the positive effect of foreign exchange, new agency brands in Japan and gains from the transition to owned distribution in Italy.
Net sales in Emerging markets increased 10% on a reported basis and 12% on an organic basis, backed by solid double-digit growth of New Mix, increased volumes across the Jack Daniel’s family of brands in Brazil and Türkiye, and an expected net increase in distributor inventories.
The Travel Retail channel’s net sales jumped 7% on a reported basis and 6% on an organic basis, owing to higher volumes of Jack Daniel’s Tennessee Whiskey, the phasing of ordering patterns and the gains from foreign exchange.
A Peek at BF.B’s Brand Performance
In the fiscal half, net sales for Whiskey products were flat year over year, both on a reported and organic basis. The launch of Jack Daniel’s Tennessee Blackberry and increased sales of Woodford Reserve, thanks to distributor inventories and transitions in the United States, were offset by weak volumes of Jack Daniel’s Tennessee Whiskey and Jack Daniel’s Tennessee Honey.
Net sales for the Tequila portfolio dipped 3% both on a reported and organic basis. Herradura’s net sales dipped 11% each on a reported and organic basis, led by soft volumes in the United States, as the tequila category has been competitive. el Jimador’s net sales inched up 1% and 2% on an organic basis, backed by increased volumes in Colombia and an expected net increase in distributor inventories in the United States.
Net sales for the Ready-to-Drink (RTD) portfolio jumped 5% both on a reported and organic basis. Net sales of New Mix surged 28% on a reported basis and 30% on an organic basis, bolstered by growth in Mexico with market share gains in an accelerating category. Jack Daniel’s RTD/RTP portfolio dipped 4% each on a reported and organic basis, mainly owing to the absence of American-made beverage alcohol from retail shelves in most provinces in Canada.
Rest of Portfolio's net sales plunged 35% on a reported basis but rose 22% on an organic basis, thanks to the conclusion of the Korbel relationship and the absence of the Sonoma-Cutrer and Finlandia prior-year TSAs. The decrease was partly offset by the distribution of new agency brands in Japan and Mexico, along with the broad-based growth of Gin Mare.
Net sales for non-branded and bulk declined 61%, due to soft used barrel sales.
BF.B’s Financial Health Snapshot
The company ended second-quarter fiscal 2026 with cash and cash equivalents of $319 million and long-term debt of $2.1 billion. Its total shareholders’ equity was $4.1 billion. As of Oct. 31, 2025, BF.B had $292 million in cash from operating activities.
On Nov.19, 2025, the company’s board approved a raise of 2% to the quarterly cash dividend to $0.2310 per share on its Class A and Class B Common Stock. The new dividend is payable on Jan. 2, 2026, to stockholders of record as of Dec. 5, 2025. Brown-Forman paid regular quarterly cash dividends for 82 straight years while hiking the regular dividend for 42 consecutive years.
The board has also authorized repurchasing of $400 million (exclusive of brokerage fees and excise taxes) of outstanding shares of Class A and Class B common stock from Oct. 1, 2025, through Oct. 1, 2026, subject to market and other conditions. As of Oct. 31, 2025, $301 million was available under the program.
What’s Ahead For BF.B in FY26?
Management continues to anticipate the operating backdrop to remain challenging in fiscal 2026, with low visibility on macroeconomic and geopolitical volatility, as it witnessed headwinds from consumer volatility and soft non-branded sales of used barrels. Nevertheless, the company remains committed to building its business in the long term, mitigating the existing environment at pace with strategic actions in fiscal 2026. The meaningful evolution of its U.S. distribution, the restructuring effort and product innovation will power growth.
Management reiterates expectations for fiscal 2026. For fiscal 2026, Brown-Forman still projects an organic net sales decrease in the low-single digit range. Organic operating income is likely to decline in the low single-digit range. The effective tax rate is still expected to be 21-23% for the current fiscal year. It has revised capital expenditure guidance to $110-$120 million, down from $125-$135 million expected earlier.
The Zacks Consensus Estimate for United Natural Foods' current financial-year earnings indicates growth of 187.3%, from the prior-year level. UNFI delivered a trailing four-quarter earnings surprise of 52.1%, on average.
Celsius Holdings, Inc. (CELH - Free Report) , which specializes in nutritional functional foods, beverages and dietary supplements, starches and nutrition ingredients, currently sports a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Celsius’ current financial-year earnings is expected to rise 80% from the corresponding year-ago reported figure. CELH delivered a trailing four-quarter earnings surprise of 42.9%, on average.
Post Holdings (POST - Free Report) , which is a consumer-packaged goods holding company, currently carries a Zacks Rank #2. POST delivered a trailing four-quarter earnings surprise of 16.5%, on average.
The Zacks Consensus Estimate for Post Holdings’ current financial-year earnings indicates growth of 1.8% from the year-ago number.
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Brown-Forman's Q2 Earnings Miss Estimates, Gross Margin Expands Y/Y
Key Takeaways
Brown-Forman Corporation (BF.B - Free Report) has reported mixed second-quarter fiscal 2026 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line missed the same. Both sales and earnings declined year over year. The fiscal second-quarter results highlight the decisive actions the company has taken to strengthen its business amid a challenging environment. With superior innovation and bold route-to-consumer strategies, it has built resilience to navigate persistent headwinds.
In the fiscal second quarter, earnings per share (EPS) of 47 cents fell 14% year over year and lagged the Zacks Consensus Estimate of 48 cents.
Net sales of $1.036 billion declined 5% on a reported basis but beat the Zacks Consensus Estimate of $1.027 billion. On an organic basis, net sales dipped 2% from the prior-year period.
This Zacks Rank #3 (Hold) company’s shares have risen 4.1% in the past three months against the industry’s 2.4% drop.
Brown-Forman’s Margins & Expenses
In the fiscal second quarter, BF.B’s gross profit of $615 million declined 5% year over year on a reported and 4% on an organic basis. However, the gross margin expanded 20 basis points (bps) to 59.3%, aided by the effect of acquisitions and divestitures. This gain was partly offset by higher costs and unfavorable price/mix.
Selling, general and administrative (SG&A) expenses of $187 million were almost flat year over year, primarily driven by reduced compensation and benefit-related expenses.
Brown-Forman Corporation Price, Consensus and EPS Surprise
Brown-Forman Corporation price-consensus-eps-surprise-chart | Brown-Forman Corporation Quote
Operating income decreased 10% year over year to $305 million on a reported basis and fell 9% on an organic basis. The operating margin of 29.4% contracted 170 bps from 31.1% reported in the year-ago quarter.
Understanding Brown-Forman’s Market Performance
In the first-half fiscal 2026, net sales in the United States decreased 9% year over year on a reported basis and were flat on an organic basis, reflecting the end of the Korbel relationship and the absence of the Sonoma-Cutrer prior-year TSA, and lower volumes of Jack Daniel’s Tennessee Whiskey, Herradura and Jack Daniel’s Tennessee Honey. Such declines were partly offset by the launch of Jack Daniel’s Tennessee Blackberry and increased net sales across the portfolio owing to changes to its distributor relationship terms.
In a challenging economic landscape, net sales in the Developed International markets dipped 4% on a reported basis and 6% on an organic basis, despite sequential improvement. The decrease was led by the absence of American-made beverage alcohol from retail shelves in the majority of the Canadian provinces and reduced volumes of Jack Daniel’s Tennessee Whiskey in Germany and the United Kingdom. The decline was partly offset by the positive effect of foreign exchange, new agency brands in Japan and gains from the transition to owned distribution in Italy.
Net sales in Emerging markets increased 10% on a reported basis and 12% on an organic basis, backed by solid double-digit growth of New Mix, increased volumes across the Jack Daniel’s family of brands in Brazil and Türkiye, and an expected net increase in distributor inventories.
The Travel Retail channel’s net sales jumped 7% on a reported basis and 6% on an organic basis, owing to higher volumes of Jack Daniel’s Tennessee Whiskey, the phasing of ordering patterns and the gains from foreign exchange.
A Peek at BF.B’s Brand Performance
In the fiscal half, net sales for Whiskey products were flat year over year, both on a reported and organic basis. The launch of Jack Daniel’s Tennessee Blackberry and increased sales of Woodford Reserve, thanks to distributor inventories and transitions in the United States, were offset by weak volumes of Jack Daniel’s Tennessee Whiskey and Jack Daniel’s Tennessee Honey.
Net sales for the Tequila portfolio dipped 3% both on a reported and organic basis. Herradura’s net sales dipped 11% each on a reported and organic basis, led by soft volumes in the United States, as the tequila category has been competitive. el Jimador’s net sales inched up 1% and 2% on an organic basis, backed by increased volumes in Colombia and an expected net increase in distributor inventories in the United States.
Net sales for the Ready-to-Drink (RTD) portfolio jumped 5% both on a reported and organic basis. Net sales of New Mix surged 28% on a reported basis and 30% on an organic basis, bolstered by growth in Mexico with market share gains in an accelerating category. Jack Daniel’s RTD/RTP portfolio dipped 4% each on a reported and organic basis, mainly owing to the absence of American-made beverage alcohol from retail shelves in most provinces in Canada.
Rest of Portfolio's net sales plunged 35% on a reported basis but rose 22% on an organic basis, thanks to the conclusion of the Korbel relationship and the absence of the Sonoma-Cutrer and Finlandia prior-year TSAs. The decrease was partly offset by the distribution of new agency brands in Japan and Mexico, along with the broad-based growth of Gin Mare.
Net sales for non-branded and bulk declined 61%, due to soft used barrel sales.
BF.B’s Financial Health Snapshot
The company ended second-quarter fiscal 2026 with cash and cash equivalents of $319 million and long-term debt of $2.1 billion. Its total shareholders’ equity was $4.1 billion. As of Oct. 31, 2025, BF.B had $292 million in cash from operating activities.
On Nov.19, 2025, the company’s board approved a raise of 2% to the quarterly cash dividend to $0.2310 per share on its Class A and Class B Common Stock. The new dividend is payable on Jan. 2, 2026, to stockholders of record as of Dec. 5, 2025. Brown-Forman paid regular quarterly cash dividends for 82 straight years while hiking the regular dividend for 42 consecutive years.
The board has also authorized repurchasing of $400 million (exclusive of brokerage fees and excise taxes) of outstanding shares of Class A and Class B common stock from Oct. 1, 2025, through Oct. 1, 2026, subject to market and other conditions. As of Oct. 31, 2025, $301 million was available under the program.
What’s Ahead For BF.B in FY26?
Management continues to anticipate the operating backdrop to remain challenging in fiscal 2026, with low visibility on macroeconomic and geopolitical volatility, as it witnessed headwinds from consumer volatility and soft non-branded sales of used barrels. Nevertheless, the company remains committed to building its business in the long term, mitigating the existing environment at pace with strategic actions in fiscal 2026. The meaningful evolution of its U.S. distribution, the restructuring effort and product innovation will power growth.
Management reiterates expectations for fiscal 2026. For fiscal 2026, Brown-Forman still projects an organic net sales decrease in the low-single digit range. Organic operating income is likely to decline in the low single-digit range. The effective tax rate is still expected to be 21-23% for the current fiscal year. It has revised capital expenditure guidance to $110-$120 million, down from $125-$135 million expected earlier.
Three Stocks Looking Good
United Natural Foods (UNFI - Free Report) is a key distributor of natural, organic and specialty food and non-food products. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for United Natural Foods' current financial-year earnings indicates growth of 187.3%, from the prior-year level. UNFI delivered a trailing four-quarter earnings surprise of 52.1%, on average.
Celsius Holdings, Inc. (CELH - Free Report) , which specializes in nutritional functional foods, beverages and dietary supplements, starches and nutrition ingredients, currently sports a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Celsius’ current financial-year earnings is expected to rise 80% from the corresponding year-ago reported figure. CELH delivered a trailing four-quarter earnings surprise of 42.9%, on average.
Post Holdings (POST - Free Report) , which is a consumer-packaged goods holding company, currently carries a Zacks Rank #2. POST delivered a trailing four-quarter earnings surprise of 16.5%, on average.
The Zacks Consensus Estimate for Post Holdings’ current financial-year earnings indicates growth of 1.8% from the year-ago number.