While it might instead sound like a heavyweight boxing match-up, actually it's just alcoholic beverage distributor Brown-Forman (NYSE:BFb) (NYSE:BFa) getting set to report second-quarter earnings on Thursday. Here's a look at whether they'll be a knockout or a split decision.

What analysts say:

  • Buy, sell, or waffle? The seven analysts covering the maker of Jack Daniels seem to have their cards evenly marked. Four rate the company a hold, with one apiece giving the decision to Brown-Forman with buy or strong buy recommendations. One analyst is voting against the company with a sell rating.

  • Revenues. Analysts are looking for an 11% increase in revenues, seeing them grow to more than $737 million.

  • Earnings. Earnings are also expected to grow a spirited 10%, to $0.96 per share.

What management says:
Like peering through a thick Canadian Mist, management expects the full year to produce earnings growth in the range of 7% to 14%, so it seems that analyst estimates would be right in the middle of that target. And while Brown-Forman expects full-year earnings to land between $3.10 and $3.30 per share, the second and third quarters tend to be the company's strongest. It will have to maintain that momentum going forward.

It should benefit from positive foreign currency exchanges, which it hasn't factored into its forecasts. But that boost will be tempered by slackening U.S. sales of its premier Jack Daniels whiskey (though international sales have been robust) and Brown-Forman's acquisition of tequila maker Casa Herradura. Brown-Forman says that purchase will be dilutive to earnings till 2009. Earlier this year, it also acquired the premium black raspberry liqueur Chambord.

Like last year, Jack Daniels' depletion rate -- shipments from wholesale distributors to retail customers -- is only growing in the mid-single-digit range. Since Brown-Forman derives about 65% of its revenues from the bourbon, it needs to continue to drive sales both here and abroad. To do that, the company has partnered with rival Bacardi to co-market its brands in the U.K. Since the agreement began in 2002, it's pushed case volume up 33%, particularly for Jack Daniels and Southern Comfort.

What management does:
Brown-Forman has been successfully pushing its products, particularly overseas, but while gross margins have continuously improved over the past year, operating margins apparently took too big a swig. The company changed distribution agreements in several countries, including Germany and Australia, which has pushed up selling and general expenses. Yet bottom-line profits have continued to perform well.

Margins % 7/05 10/05 1/06 4/06 7/06
Gross 65.6 65.8 66.5 66.9 67.2
Op. 25.5 25.9 27.8 26.3 26.5
Net 14.5 14.6 15.8 16.2 19.7
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:
Brown-Forman was slow to accept overseas expansion, but it's now done so in a two-fisted fashion, neatly boosting revenues and profits during a time when U.S. spirit sales were lagging. Half of Jack Daniels' revenues are generated overseas, and reduced tariffs in numerous countries have popped the cork on sales. Now that the U.S. market appears to be trimming its beer belly, as consumers move back to spirits, Brown-Forman will be a formidable competitor that investors can savor like a fine wine.

Competitors:

  • Constellation Brands (NYSE:STZ)
  • Diageo (NYSE:DEO)
  • Fortune Brands (NYSE:FO)

Related Foolishness:

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Fool contributor Rich Duprey does not own shares of any of the stocks appearing in this article. The Fool has a disclosure policy.