Brown-Forman Q2 Earnings Beat Estimates - Analyst Blog
December 05 2013 - 8:00AM
Zacks
Driven by solid top-line growth and
improved margins, Brown-Forman Corporation (BF.B)
posted strong bottom-line results for the second quarter of fiscal
2014. Earnings per share came in at 96 cents, which rose 20% year
over year and beat the Zacks Consensus Estimate of 92 cents.
Net sales increased 6% year over
year to $1,079 million. Moreover, after deducting excise taxes,
sales came in at $833 million, up 7.2% from the prior-year figure
of $777 million. The rise was primarily driven by strong demand for
whiskey across the regions where the company operates and its
geographical expansion initiatives. On an underlying basis, the
company’s net sales increased 8%. The Zacks Consensus Estimate for
the quarter was $855 million.
In the quarter, Brown-Forman’s
gross profit increased 10% to $576 million from $525 million in the
year-ago comparable quarter. Gross margin expanded 160 basis points
(bps) to 53.4% from 51.8% in the prior-year period, primarily due
to higher sales and fall in excise taxes and input costs as a
percentage of sales.
Selling, general and administrative
expenses (SG&A) rose 2% from the year-ago quarter to $162
million. Advertising expenses increased 4% year over year to $111
million.
Operating profit soared 19% year
over year to $311 million from $262 million in the prior-year
period. Operating margin expanded 300 bps to 28.8% from 25.8% in
the year-ago quarter, primarily due to increased gross margin and
lower operating expenses as a percentage of sales.
Balance Sheet & Cash
Flow
Brown-Forman ended the quarter with
cash and cash equivalents of $204 million and long-term debt of
$997 million. During the first half of fiscal 2014, Brown-Forman,
which competes with Beam Inc. (BEAM) and
Boston Beer Company Inc. (SAM), generated $201
million of cash from operations, against $165 million in the
comparable period of the previous fiscal. During the first two
quarters of fiscal 2014, the company returned $109 million to
shareholders through dividend payouts.
Fiscal 2014
Guidance
Going forward, Brown-Forman
reaffirmed its fiscal 2014 outlook. The company still expects
fiscal 2014 earnings in the range of $2.80–$3.00 per share.
Currently, the Zacks Consensus Estimate stands at $2.95 per share,
which is towards the higher end of the company’s guidance.
Moreover, the company projects a rise in operating income in the
range of 9%–11% while underlying sales are expected to rise in high
single digits.
Other Stocks to
Consider
Currently, Brown-Forman carries a
Zacks Rank #3 (Hold). A better placed stock in the
beverages-alcohol industry is Constellation Brands
Inc. (STZ), which has a Zacks Rank #2 (Buy).
BEAM INC (BEAM): Free Stock Analysis Report
BROWN FORMAN B (BF.B): Free Stock Analysis Report
BOSTON BEER INC (SAM): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis Report
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