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Brown-Forman (BF.B) to Report Q2 Earnings: What's in Store?

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Zacks Equity Research
·4 min read
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Brown-Forman Corporation BF.B is slated to release second-quarter fiscal 2021 results on Dec 8. This alcoholic beverage bigwig is likely to deliver a revenue decline in the to-be-reported quarter. The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $967.2 million, indicating a fall of 2.2% from the figure reported in the year-ago quarter.

Further, the consensus mark for the to-be-reported quarter’s earnings is pegged at 52 cents per share, suggesting a decline of 11.9% from the year-ago period’s reported figure. Earnings estimates for fiscal second-quarter earnings have been unchanged over the past 30 days.

However, the company delivered an earnings surprise of 29% in the last reported quarter. Also, its earnings outperformed the Zacks Consensus Estimate by 8.2%, on average, in the trailing four quarters.

BrownForman Corporation Price and EPS Surprise


BrownForman Corporation Price and EPS Surprise
BrownForman Corporation Price and EPS Surprise

BrownForman Corporation price-eps-surprise | BrownForman Corporation Quote

Key Factors to Note

Brown-Forman has been benefiting from its efforts to capitalize on opportunities in the shift in consumption to at-home occasions, with increased investments in the off-premise and e-premise channels. Further, it has been witnessing accelerated demand trends in its spirits business in the past few months, as consumers have been experimenting with making cocktails and margaritas at home. The rise in this trend has led to significant gains in the off-premise and e-premise channels as well as boosted demand for spirit-based RTD cocktails. This is likely to have aided the company’s earnings and sales in second-quarter fiscal 2021.

Additionally, the company’s stringent cost-management initiatives have been aiding the operating margin and the bottom line. Moreover, it is confident of capitalizing on its American Whiskey strategy and benefitting from investments in its brand portfolio.

However, headwinds in the on-premise channel, which represents nearly 20% of the company’s global business, have been hurting its sales performance in the past few quarters. Also, the Travel Retail business has been affected by travel bans and other restrictions.

In the last reported quarter’s earnings call, management stated that it expected no recovery in the Travel Retail business in the near term and anticipated a significant decline on a year-over-year basis throughout fiscal 2021. Further, it remained uncertain about the timing and strength in the recovery of the on-premise channel due to varied factors. In all, it did not predict the on-premise business to return to full capacity in fiscal 2021. These disruptions are likely to have affected the company’s top line in the to-be-reported quarter.

Also, the management predicted gross margin pressures to continue, owing to higher input costs and mix shift. It expects advertising investments to accelerate as the environment evolves, which may have partly offset margins and the bottom line in the to-be-reported quarter.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Brown-Forman this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Brown-Forman carries a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Chewy Inc. CHWY presently has an Earnings ESP of +4.85% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Constellation Brands Inc. STZ currently has an Earnings ESP of +2.64% and a Zacks Rank #3.

lululemon athletica inc. LULU has an Earnings ESP of +0.79% and a Zacks Rank #3 at present.

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lululemon athletica inc. (LULU) : Free Stock Analysis Report
Constellation Brands Inc (STZ) : Free Stock Analysis Report
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