Brown-Forman (BF.B) Poised to Ride the Momentum: Time to Buy?

Brown-Forman Corporation’s BF.B stock has been consistently displaying growth driven by robust surprise trend, strong brand portfolio, efforts to expand globally, strategic initiatives and an optimistic outlook. Further, the company is confident of growth at its premium American whiskey and tequila brands. Moreover, new product launches including Jack Daniel's Tennessee Rye and Slane Irish Whiskey position it well for growth.

This alcoholic beverage stock has advanced 17.8% in the last three months, against the industry’s 0.7% decline. 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 0.5%, 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 #1 (Strong Buy), while carrying a Momentum Score of B. That said, let’s find out more about the factors aiding this Louisville, KY-based company’s performance.

Robust Earnings Trend & Strength in Underlying Sales

Most of the recent momentum in the stock comes from Brown-Forman’s robust earnings trend. The company reported second straight earnings beat in second-quarter fiscal 2018 driven by strength in margins. Further, this marked the company’s fifth straight quarter of growth in underlying sales driven by persistent momentum in its focus categories and strength in Jack Daniel’s, Woodford Reserve, Old Forester and Herradura brand families. Further, net sales benefited from improved economies in the emerging markets.

Brown Forman Corporation Price and EPS Surprise

Brown Forman Corporation Price and EPS Surprise | Brown Forman Corporation Quote

Optimistic View Lifts Estimates

Despite the volatility in emerging markets and stiff competition, the company remains confident of persistent growth in the second half as is evident from its recently raised guidance for fiscal 2018. The company now projects 6-7% growth in underlying sales compared with 4-5% growth anticipated earlier. Earnings per share are estimated in the range of $1.90-$1.98, compared with the previous guidance of $1.85-$1.95.

Consequently, the Zacks Consensus Estimate for the fiscal years witnessed an uptrend in the last seven days. Estimate for fiscal 2018 and 2019 rose by 1 cent and 7 cents, respectively, to $2.00 per share and $2.32 per share.

Strong Brands Portfolio — Key Strength

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 market position.

Expansion Strategy to Drive Growth

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 acquired two historic properties at West Main Street in Louisville, KY to boost Old Forester brand.

Want More of Alcohol Stocks? Check These

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

Boston Beer has jumped nearly 6.5% in the last three months. Moreover, the company has a long-term earnings growth rate of 5%.

Craft Brew Alliance has surged 5.7% in the last three months. Further, the company has delivered an average positive earnings surprise of 250.2% in the trailing four quarters.

Constellation Brands has gained nearly 41.5% in the past year. Moreover, it has a long-term earnings growth rate of 19%.

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