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Brown-Forman Beats Earnings Estimate

Zacks Equity Research

Brown-Forman Corporation’s (BF.B) fiscal fourth-quarter 2013 (ended Apr 30, 2013) earnings of 52 cents a share came in ahead of the Zacks Consensus Estimate of 46 cents. Moreover, earnings increased 6.1% from 49 cents reported in the year-ago quarter.

Net sales increased 8% year over year to $866 million primarily due to strong demand of whiskey across all regions in which the company operates. On an underlying basis, the company’s net sales increased 7%. Moreover, the quarterly sales were well above the Zacks Consensus Estimate of $646 million.

During the quarter, Brown-Forman’s gross profit increased 9% to $460 million from $422 million reported in the year-ago quarter. Gross margin expanded 44 basis points (bps) to 53.12% compared with 52.68% in the prior-year period, primarily due to lower excise taxes as a percentage of sales.

Selling, general and administrative expenses (SG&A) increased 3% from the year-ago quarter to $180 million, while SG&A as a percentage of sales contracted 106 basis points to 20.79%. Advertising expenses remained flat year over year at $99 million.

Operating profit during the quarter climbed 18% to $177 million from $150 million in the prior-year period.  Operating margin expanded 201 bps to 20.44% compared with 18.73% in the year-ago quarter primarily driven by improved gross profit margin, benefiting from lower SG&A and advertising expenses.

Balance Sheet & Cash Flow

Brown-Forman, which has a Zacks Rank #2 (Buy), ended the quarter with cash and cash equivalents of $204 million and long-term debt of $997 million. During the quarter, Brown-Forman generated $537 million of cash from operations and deployed $1,063 million toward dividend payout.

Fiscal 2014 Guidance

Going forward, Brown-Forman expects fiscal 2014 earnings in the range of $2.80–$3.00 per share. Moreover, the company projects operating income to increase in the range of 9%–11%, while underlying sales are expected to rise in the high-single-digit range.

Other Stocks to Consider

Other stocks worth considering in the beverages-alcohol industry are Diageo Plc (DEO), Grupo Modelo, S.A.B. de C.V. (GPMCY) and Constellation Brands Inc. (STZ). All these stocks hold a Zacks Rank #2 (Buy).

Read the Full Research Report on BF.B

Read the Full Research Report on STZ

Read the Full Research Report on DEO

Read the Full Research Report on GPMCF

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