It has been about a month since the last earnings report for Brown-Forman B (BF.B Quick QuoteBF.B - Free Report) . Shares have lost about 5.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Brown-Forman B due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Brown-Forman Corporation before we dive into how investors and analysts have reacted as of late.

Brown-Forman Q1 Earnings Meet, Sales Miss on Tequila & Barrel Weakness

Brown-Forman posted first-quarter fiscal 2027 results, wherein the bottom line missed the Zacks Consensus Estimate and declined year over year. However, the top line surpassed the estimates and increased year over year.

BF.B reported first-quarter fiscal 2027 earnings of 38 cents per share, rising 6% year over year and meeting the Zacks Consensus Estimate. 

Net sales of $911 million declined 1% and missed the consensus mark of $921.2 million. On an organic basis, net sales dipped 1% from the prior-year period.

The top line was pressured by the end of the Korbel relationship, lower used barrel sales and tequila weakness. Ready-to-Drink sales rose 20%, led by a 48% jump in New Mix, providing a key offset to those headwinds.

BF.B’s Margins Reflect Lower Costs

Gross profit fell 1% year over year to $549 million and rose 1% on an organic basis. The gross margin expanded 40 basis points (bps) to 60.2%, primarily reflecting lower costs and the end of the Korbel relationship, partly offset by unfavorable foreign exchange and price/mix.

Advertising expenses of $114 million declined 5% year over year, on a reported basis, and dipped 4% on an organic basis, as lower spending on Jack Daniel’s Tennessee Whiskey more than offset increased investment behind the international launch of Jack Daniel’s Tennessee Blackberry. 

Selling, general and administrative (SG&A) expenses rose 4% to $185 million due to the timing of targeted organizational realignment costs.

Brown-Forman’s Operating Profit Faces Cost Pressure

Operating income declined 3% year over year to $252 million on a reported basis but increased 4% organically. The operating margin contracted 50 bps to 27.7% as higher operating expenses more than offset gross margin expansion.
Net income increased 3% year over year to $176 million. The earnings improvement reflected lower non-operating post-retirement expenses and the accretive impacts of prior-year share repurchases, partly offset by lower operating income.

BF.B’s Brand Trends Show RTD Strength

Whiskey net sales were flat on both reported and organic basis. Jack Daniel’s Tennessee Whiskey was also flat, while declines in Jack Daniel’s Tennessee Honey and Gentleman Jack offset the continued international rollout of Jack Daniel’s Tennessee Blackberry.

Ready-to-Drink net sales increased 20% reported and 11% organically. New Mix surged 48% reported and 36% organically on strong consumer demand in Mexico, favorable currency effects and its U.S. launch. Tequila sales fell 12%, with Herradura down 17% and el Jimador down 10%. Rest of Portfolio sales declined 35%, while non-branded and bulk sales dropped 61%.

Brown-Forman’s Geographic Results Remain Mixed

U.S. net sales declined 3% but were flat organically. The end of the Korbel relationship, an estimated net decrease in distributor inventories tied to prior-year distributor transitions and lower Jack Daniel’s Tennessee Blackberry volumes weighed on the results, partly offset by higher Jack Daniel’s Tennessee Whiskey volumes and the JDCC transition.

Developed International sales declined 6% reported and 8% organically, hurt by lower Jack Daniel’s Tennessee Whiskey volumes in Germany, France and Spain. Emerging-market sales increased 11% reported and 9% organically, supported by Mexico and double-digit New Mix growth, while Travel Retail sales slipped 1%.

BF.B’s Cash Flow Improves as Debt Is Repaid

Cash provided by operating activities increased $13 million year over year to $173 million. The free cash flow rose $32 million to $161 million, supported by stronger operating cash flow and lower capital spending needs.

Brown-Forman ended the quarter with $301 million in cash and cash equivalents, and $2.08 billion in long-term debt. The company also repaid the $343-million principal amount of its 1.20% senior notes at maturity and returned $106 million to stockholders through quarterly dividends.

Brown-Forman Reaffirms FY27 Outlook

Management expects a challenging fiscal 2027 operating environment amid macroeconomic pressure and geopolitical instability, particularly in developed markets. The company expects to benefit from restructuring actions, U.S. distributor changes and continued product innovation.

Brown-Forman reaffirmed its outlook for organic net sales to be approximately flat and organic operating income to decline 3-5%. The company also projects an effective tax rate of 20-22% and capital expenditure of $60-$70 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in fresh estimates.

VGM Scores

At this time, Brown-Forman B has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Brown-Forman B has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.