Valued at a market cap of $14.7 billion, Brown-Forman Corporation (BF-B) manufactures, distills, bottles, imports, exports, markets, and sells various alcoholic beverages. The Louisville, Kentucky-based company provides wines, whiskey spirits, whiskey-based flavored liqueurs, ready-to-drink cocktails, vodkas, tequilas, gin, brandy, rum, bourbons, and liqueurs under various brands, including Jack Daniel's, Old Forester, and Woodford Reserve to name a few.
This spirits and wine company's shares have significantly lagged behind the broader market over the past 52 weeks. Brown-Forman has declined 45.7% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 22.3%. Moreover, the stock is down 18% on a YTD basis, compared to SPX’s 4% rise during the same time frame.
Zooming in further, BF-B’s underperformance looks even more pronounced when compared to the Consumer Staples Select Sector SPDR Fund’s (XLP) 10.9% return over the past 52 weeks and 2.5% gain on a YTD basis.
On Dec. 5, shares of Brown-Forman skyrocketed 10.7% after its Q2 earnings release. The company delivered EPS of $0.55 per share, which advanced 9% from the year-ago quarter, and reported revenues of $1.1 billion, which declined nearly 1% year-over-year. BF-B experienced weaker revenue trends across all geographic regions. The top-line decline was primarily fueled by lower Jack Daniel’s Tennessee Whiskey sales and the divestiture of Finlandia and Sonoma-Cutrer. Nonetheless, on an organic basis, net sales improved 3% from the prior-year period.
Adding to the positives, the company expects to return to organic net sales and organic operating income growth in fiscal 2025, aided by gains in international markets and the benefit of normalizing inventory trends. This might have further bolstered investor confidence. However, it expects challenges from the global macroeconomic and geopolitical uncertainties to persist.
For the current fiscal year, ending in April, analysts expect BF-B’s EPS to decline 15.9% year over year to $1.80. The company’s earnings surprise history is mixed. It topped the Wall Street estimates in three of the last four quarters while missing on another occasion.
Among the 16 analysts covering the stock, the consensus rating is a “Hold,” which is based on three “Strong Buy,” 10 “Hold,” and three “Strong Sell” ratings.
On Jan. 9, Bernstein analysts maintained an “Outperform” rating on BF-B but lowered its price target to $57.50 - the Street-high price target, which indicates an 84.6% potential upside from the current levels.
The mean price target of $44.91 represents a 44.2% upside from Brown-Forman’s current price levels.
