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Brown-Forman Hits 52-Week High: What's Behind the Rally?

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Brown-Forman Corporation (BF.B - Free Report) appears a lucrative investment option now, driven by its solid brand portfolio, expansion plans, robust shareholder-friendly moves and impressive surprise history.

Notably, shares of this leading alcoholic beverages’ maker hit a 52-week high of $57.15 on May 9, closing the session slightly lower at $56.97. In a year’s time, this Zacks Rank #2 (Buy) stock surged 43.5%, substantially outperforming the industry’s gain of 1.2%.

 



 

Let’s Delve Deeper

Robust Portfolio of Strong Brands

Among the world’s premium alcoholic beverage producers, Brown-Forman commands a strong portfolio of globally recognized brands. It currently owns and produces a multitude of popular spirit brands, with Jack Daniels and Finlandia Vodka topping the list. Moreover, we expect the company’s continued focus on pricing, product innovation and expanding operations in emerging markets to boost its operational performance, and strengthen its market position.

Expanding Operations & Premium Brands

Brown-Forman plans to expand Jack Daniel's market share in the developed markets, such as France and the United States as well as in the emerging markets like Russia, Poland, and Mexico, where the whiskey category is in the early stages of development. Also, management is on track to expand the sphere of other brands, such as Jack Daniel's Tennessee Honey, Jack Daniel’s Tennessee Fire, Gentleman Jack and Jack Daniel's Single Barrel within Jack Daniel’s. Furthermore, Brown-Forman has entered the fastest-growing spirit category, the Irish Whiskey, by purchasing all of Ireland-based Slane Castle Irish Whiskey Limited’s shares. These growth efforts should generate higher sales and boost the company’s profitability.

Shareholder-Friendly Moves

Brown-Forman has a tradition of returning cash to shareholders through regular dividend payouts and share repurchases. In January, management had announced a five-for-four stock split that was paid on Feb 28, 2018. The company also declared a special dividend of $1 on split adjusted Class A and Class B stock, which was paid on Apr 23. Additionally, management approved a quarterly cash dividend of 15.8 cents per share on a split-adjusted basis, paid on Apr 2. In fact, the company remains keen on delivering greater long-term returns to shareholders.

Impressive Earnings & Sales History

In the last reported quarter, Brown-Forman marked its third straight quarter of earnings and sales beat. In fact, the quarterly results also grew year over year. Additionally, the quarter marked the sixth straight period of growth in underlying sales, driven by persistent momentum in its focus categories and strength in Jack Daniel’s led by premium American whiskey portfolio. Further, net sales gained from balanced growth across geographies. Notably, management believes that it is on track to deliver high-quality, top-tier results in fiscal 2018. The company’s earnings and cash flows are anticipated to benefit in the future owing to the new tax reform. All these efforts are likely to add value to the company’s fourth-quarter fiscal 2018 results.

Wrapping Up

We believe that Brown-Forman will sustain the momentum and continue gaining investors’ confidence on the back of all these above-mentioned robust endeavors.

Want More of Consumer Staples Stocks? Check These

The Boston Beer Company, Inc. (SAM - Free Report) with a long-term earnings growth rate of 9.5% has pulled off an average positive earnings surprise of 41.8% in the trailing four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calavo Growers, Inc. (CVGW - Free Report) has a Zacks Rank #2 and delivered an average positive earnings surprise of 31.6% in the trailing four quarters.

Limoneira Company (LMNR - Free Report) , also a Zacks Rank #2 stock, has pulled off an average positive earnings surprise of 14.1% in the trailing four quarters.

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