Louisville, Kentucky-based Brown-Forman Corporation (BF.B) manufactures, distills, bottles, and markets various alcoholic beverages. Valued at a market cap of $19 billion, the company provides a broad portfolio of spirits, ready-to-drink cocktails, and wines under various recognized brands, including Jack Daniel's, Woodford Reserve, and Old Forester, to name a few.
Shares of this distillery have significantly lagged behind the broader market over the past 52 weeks. BF.B has declined 31.7% over this time frame, while the broader S&P 500 Index ($SPX) has soared 30.1%. Moreover, the stock has fallen 29.4% in 2024, compared to SPX’s 24.1% gain on a YTD basis.
Narrowing the focus, BF.B’s underperformance becomes evident when compared to the Consumer Staples Select Sector SPDR Fund’s (XLP) 15.5% gains over the past 52 weeks and 11.4% returns on a YTD basis.
On Aug. 29, Brown-Forman released its Q1 earnings results. The company’s net sales declined 8.4% year-over-year to $951 million, as the company experienced softness in revenues across all geographic aggregations, which were primarily impacted by the timing of shipments in the year-ago period related to inventory replenishment and the execution of the company’s pricing strategy. Meanwhile, its EPS declined 14.6% compared to the year-ago quarter to $0.41, missing analysts’ bottom-line estimates by a notable 10.9%.
However, the BF.B stock gained 1.3% after its earnings release as the company reaffirmed its full-year organic net sales and organic operating income growth guidance range of 2% to 4%, which provided some reassurance to investors. Moreover, the company has plans to carry out massive capital expenditures during the year, ranging between $195 million and $205 million, demonstrating its approach toward growth.
For the current fiscal year, ending in April 2025, 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 beat or met the consensus estimates in three of the last four quarters while missing on another occasion.
Among the 14 analysts covering the stock, the consensus rating is a “Hold,” which is based on three “Strong Buy,” nine “Hold,” and two “Strong Sell” ratings.
This configuration is slightly bearish compared to a month ago when four analysts recommended a “Strong Buy” rating.
On Nov. 18, Evercore ISI analyst Robert Ottenstein maintained an “In Line” rating on BF.B and lowered its price target to $45, which indicates an 11.7% potential upside from the current levels.
The mean price target of $47 represents a 16.6% upside from BF.B’s current price levels. Meanwhile, the street-high price target of $61 suggests a massive upside potential of 51.4%.
