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Brown-Forman (BF.B) Stock Moving Up the Charts: Time to Buy?

Zacks

Brown-Forman Corporation BF.B has been exhibiting consistent growth as evident from its stock movement, which has hardly seen a dip in quite some time. The company’s strong performance can be attributed to its strong brand portfolio, efforts to expand globally, strategic initiatives and a robust outlook. Additionally, the company is poised to gain from industry growth trends.

Recent observations reveal that alcohol sales trends have been witnessing a change with higher demand for flavored products as well as tequilas. In fact, the industry has recently observed the spirits segment gathering momentum, accounting for about 36% of the total alcohol market. We believe Brown-Forman is well-positioned to gain from these ongoing industry trends driven by strength in its premium American whiskey and tequila brands along with its Jack Daniel’s trademark.

This alcoholic beverage company has seen its shares advance 14.6% in the last three months, outpacing the industry’s upside of 11.1%. Currently, the industry is placed at the top 17% of the Zacks classified industries (45 out of 256). In fact, the company’s shares have substantially outperformed the broader Consumer Staples sector’s gain of 1.4%, which is placed at the top 31% (5 out of 16) of the Zacks classified sectors.



These factors have aided the company to retain the Zacks Rank #2 (Buy), while carrying a Growth Score of B. That said, let’s find out more about the factors aiding this Louisville, KY-based company’s performance.

Robust Outlook

Most of the growth witnessed in recent months can be attributed to the company’s robust outlook for fiscal 2018. The company remains confident of persistent growth in underlying net sales and operating income in fiscal 2018. Hence, it reiterated underlying net sales and operating income guidance for the fiscal. Moreover, the company raised earnings per share view for the fiscal.

Management continues to project 4-5% growth in underlying sales mainly backed by growth of its premium American whiskey and tequila brands, comprising innovation for Jack Daniel’s RTDs. Further, growth is likely to come from new product launches including the Jack Daniel's Tennessee Rye and Slane Irish Whiskey. Underlying operating income is expected to increase in range of 6-8%. Further, the company estimates earnings per share in the range of $1.85-$1.95, compared with the previous guidance of $1.80-$1.90. The company’s revised earnings forecast assumes tax rate of nearly 28% and gains from foreign currency tailwinds due to reduced dollar. For fiscal 2018, the company anticipates slight foreign currency tailwinds to benefit results.

A Strong Portfolio of Brands Gives an Edge

Brown-Forman is armed with a sturdy portfolio of globally recognized brands, which makes it the major producer and distributor of premium alcoholic beverages in the world. It currently owns and produces a multitude of popular spirit brands, with Jack Daniels, Southern Comfort, and Finlandia Vodka being a few of their most popular. Moreover, we anticipate the company’s continued focus on pricing, product innovation and expanding operations in emerging markets to boost operational performance, and further strengthen its market position.

Expansion – A Key Growth Strategy

Going forward, Brown-Forman plans to expand Jack Daniel's market share in the developed markets as well as emerging markets, where the whiskey category is in the early stages of development. Additionally, it is on track to expand the sphere of other brands, alongside entering the fastest-growing spirit category — the Irish Whiskey — with the purchase of all shares of Slane Castle Irish Whiskey Limited in Ireland. Meanwhile, the company concluded the sale of its Southern Comfort and Tuaca trademarks to Sazerac as part of its portfolio management and prioritization of strategic brands.

Want More of Beverage Stocks? Check These

Some other top-ranked stocks in the same industry include The Boston Beer Company, Inc. SAM, Craft Brew Alliance, Inc. BREW , each sporting a Zacks Rank #1 (Strong Buy), and Constellation Brands Inc. STZ with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boston Beer has jumped nearly 26.2% in the last three months. Moreover, the company has delivered an average positive earnings surprise of 50% in the trailing four quarters.

Craft Brew Alliance has surged 4.7% in the last three months. Further, the company has delivered an average positive earnings surprise of 222.8% in the trailing four quarters.

Constellation Brands has gained nearly 35.8% year to date. Moreover, it has a long-term earnings growth rate of 18.4%.

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