Brown-Forman Hits 52-Week High - Analyst Blog

Shares of Brown-Forman Corporation (BF.B) reached a new 52-week high of $89.85 yesterday and closed the trading session at $89.06. Apart from strong third-quarter fiscal 2014 results and an upbeat guidance, the company has been performing well on the back of brand building and inorganic growth strategies. Notably, the stock price of this alcoholic beverage company rose approximately 19.7% year-to-date.

The average volume of shares traded over the last 3 months was approximately 467K. Moreover, the company currently trades at a forward P/E of 29.5x, higher than the industry average of 19.6x. The premium valuation is justified based on its long-term estimated earnings per share EPS growth rate of 11.5%, which is substantially higher than the industry average of 7.2%.

Investors are optimistic about this Zacks Rank #2 (Buy) stock after it posted EPS of 82 cents on Mar 5, which handily surpassed the Zacks Consensus Estimate of 75 cents and rose 13% year over year. The bottom-line results were primarily attributable to solid top-line growth, prudent cost management and lower effective tax rate.

Brown-Forman reported net sales of $1,078 million, marking a rise of 5% from the prior-year quarter. Moreover, after deducting excise taxes, sales came in at $782 million, up 4.5% from the year-earlier quarter figure of $747 million. The rise was primarily driven by strong demand for whiskey across all regions where the company operates and its geographical expansion initiatives. The Zacks Consensus Estimate for the quarter was $782 million.

Further, bolstered by better-than-expected third-quarter results, Brown-Forman raised its fiscal 2014 outlook. The company now expects fiscal 2014 earnings per share in the range of $2.95–$3.05, up from the previous forecast of $2.80–$3.00. Currently, the Zacks Consensus Estimate stands at $3.02 per share.

We expect the company's growth momentum to continue, given its sustained focus on pricing, product innovation and penetration into the emerging markets, which facilitate in boosting its operational performance and strengthening its position. Moreover, we consider Brown-Forman's consistent focus on developing the premium Jack Daniel's brand through innovation and packaging changes to have paid off, making it a thriving company.

Apart from Brown-Forman, Under Armour Inc. UA, DST Systems Inc. DST and Equifax Inc. EFX achieved new 52-week highs of $124.79, $99.56 and $72.90 respectively, on March 19, 2014.