Brown-Forman Soars to a New High - Analyst Blog

Shares of Brown-Forman Corporation (BF.B) reached a new 52-week high of $96.02 yesterday and closed the trading session at $95.97. Apart from strong fourth-quarter fiscal 2014 results and an upbeat guidance for fiscal 2015, 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 28.6% year-to-date.

The average volume of shares traded over the last 3 months was approximately 436K. Moreover, the company currently trades at a forward P/E of 28.7x, 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 9.4%.

Investors are optimistic about this Zacks Rank #3 (Hold) stock after it posted fourth quarter earnings per share of 62 cents on Jun 4, which handily surpassed the Zacks Consensus Estimate of 59 cents and rose 17% year over year. The strong 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 $893 million, marking a rise of 3% from the prior-year quarter. After deducting excise taxes, sales came in at $689 million, up 4.4% from the prior-year figure of $660 million. The rise was primarily driven by strong demand for whiskey across the company's operating regions along with its geographical expansion initiatives. The Zacks Consensus Estimate for the quarter was $703 million.

Further, bolstered by the better-than-expected fourth-quarter results, Brown-Forman expects the growth story to continue in fiscal 2015 driven by solid worldwide demand for American whiskey. Therefore, the company anticipates the underlying and reported sales will grow in the range of 6% to 8% in fiscal 2015.

Moreover, operating income is expected to increase in the band of 9% to 11% on an underlying as well as reported basis. Based on the above expectations, the company projected earnings to be in the band of $3.25 to $3.45 per share for fiscal 2015.

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

Apart from Brown-Forman, Citi Tends Inc. CTRN, Constellation Brands Inc. STZ and Spectrum Brands Holdings Inc. SPB achieved new 52-week highs of $21.94, $85.99 and $82.65 respectively, on Jun 18, 2014.

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