Wine and spirits distributor Brown-Forman
What analysts say:
- Buy, sell, or waffle? Three of the eight analysts covering Brown-Forman rate it a buy, while two say hold. Three analysts rate the Jack Daniels seller to underperform. No one has come right out and said sell.
- Revenue. Revenue is expected to jump nearly 9% for the quarter to $751.3 million, and 16% for the year to $3.3 billion.
- Earnings. Profits are expected to grow 23% to $0.69 per share for the quarter. The consensus view of $3.45 for the year is below management's high-end guidance of $3.50 per share.
What management says:
While the U.S. accounts for 53% of Brown-Forman's net sales, it's actually declining in importance as sales in other countries carry more weight. International expansion provides a significant portion of the company's growth, something that really hasn't changed over the past decade. Markets outside of the U.S. contributed more than 75% of the growth in net sales in 2007.
As a result, even though management lowered its top-end guidance for the year by $0.04 last quarter, Brown-Forman should still benefit smartly from the weak dollar. Expect such gains to be offset by higher fuel and grain costs, which will affect not only the company's cost of distribution, but also expenses associated with distillation.
What management does:
That impact can be seen in the margin compression that has been underway for a while now. The Casa Herradura acquisition still has the potential to boost margins because premium brands continue to support the underlying business as the economy falters, affecting lower-quality spirits and the lower margins they bring.
|
1/07 |
4/07 |
7/07 |
10/07 |
1/08 |
|
|---|---|---|---|---|---|
|
Gross |
67.6% |
66.8% |
66.2% |
66.2% |
65.6% |
|
Operating |
26.2% |
26.6% |
26.3% |
26.4% |
26.1% |
|
Net |
18.8% |
17.5% |
17% |
16.3% |
16.1% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
Last quarter, I wondered whether investors would find it tough to swallow Brown-Forman's higher valuation compared with peers like Diageo
That makes the spread in market valuation even further apart now. At almost 19 times forward earnings, Brown-Forman trades at a 30% premium to its nearest rival, Diageo. Yet with InBev making a play for Anheuser-Busch
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