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Analyst Estimates: Here's What Brokers Think Of Brown-Forman Corporation (NYSE:BF.B) After Its Second-Quarter Report

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Simply Wall St
·4 min read
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Shareholders might have noticed that Brown-Forman Corporation (NYSE:BF.B) filed its second-quarter result this time last week. The early response was not positive, with shares down 3.9% to US$76.75 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$985m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 3.4% to hit US$0.50 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Brown-Forman

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, Brown-Forman's 13 analysts currently expect revenues in 2021 to be US$3.40b, approximately in line with the last 12 months. Statutory earnings per share are forecast to reduce 4.4% to US$1.85 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.40b and earnings per share (EPS) of US$2.00 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

The consensus price target held steady at US$72.89, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Brown-Forman analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$62.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Brown-Forman shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Brown-Forman's revenue growth is expected to slow, with forecast 1.6% increase next year well below the historical 2.5%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.3% next year. Factoring in the forecast slowdown in growth, it seems obvious that Brown-Forman is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Brown-Forman. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$72.89, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Brown-Forman. Long-term earnings power is much more important than next year's profits. We have forecasts for Brown-Forman going out to 2025, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Brown-Forman , and understanding it should be part of your investment process.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.