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Category: Stock Market and Brown-Forman
Date: 9 June 2020 Stock Price: $70.05 We take a look at the earnings release for the 4th quarter of their 2020 fiscal year of beverage brand owner Brown-Forman whose brands include Jack Daniels and el Jimador tequila with revenues for the 4th quarter topping $709 million.
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About Brown-Forman
1870:
With $5,500 in saved and borrowed money, George Garvin Brown, a young pharmaceuticals salesman in Louisville, Kentucky, starts J.T.S. Brown and Bro. with his half-brother. They sell whisky in sealed glass bottles to assure its quality, an innovative approach at a time when whisky is commonly sold by the barrel. Old Forester Kentucky Straight Bourbon Whisky is the flagship brand. After several name changes and the dissolution of the original partnership, George Garvin enters in a partnership with George Forman, his accountant and friend, and Brown-Forman is created
Today:
For almost 150 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s & Cola, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, Gentleman Jack, Jack Daniel’s Single Barrel, Finlandia, Korbel, el Jimador, Woodford Reserve, Old Forester, Canadian Mist, Herradura, New Mix, Sonoma-Cutrer, Early Times, Chambord, BenRiach and GlenDronach. Brown-Forman’s brands are supported by over 4,800 employees and sold in approximately 170 countries worldwide. The image below shows some of the main highlights for Brown-Forman for their 2019 fiscal year
Brown-Forman Corporation was incorporated under the laws of the State of Delaware in 1933, successor to a business founded in 1870 as a partnership and later incorporated under the laws of the Commonwealth of Kentucky in 1901. We primarily manufacture, bottle, import, export, market, and sell a wide variety of alcoholic beverages under recognized brands. We employ approximately 4,700 people on six continents (excluding individuals that work on a part-time or temporary basis), including approximately 1,200 people in Louisville, Kentucky, USA, home of our world headquarters. We are the largest American-owned spirits and wine company with global reach.
With $5,500 in saved and borrowed money, George Garvin Brown, a young pharmaceuticals salesman in Louisville, Kentucky, starts J.T.S. Brown and Bro. with his half-brother. They sell whisky in sealed glass bottles to assure its quality, an innovative approach at a time when whisky is commonly sold by the barrel. Old Forester Kentucky Straight Bourbon Whisky is the flagship brand. After several name changes and the dissolution of the original partnership, George Garvin enters in a partnership with George Forman, his accountant and friend, and Brown-Forman is created
Today:
For almost 150 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s & Cola, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, Gentleman Jack, Jack Daniel’s Single Barrel, Finlandia, Korbel, el Jimador, Woodford Reserve, Old Forester, Canadian Mist, Herradura, New Mix, Sonoma-Cutrer, Early Times, Chambord, BenRiach and GlenDronach. Brown-Forman’s brands are supported by over 4,800 employees and sold in approximately 170 countries worldwide. The image below shows some of the main highlights for Brown-Forman for their 2019 fiscal year
Brown-Forman Corporation was incorporated under the laws of the State of Delaware in 1933, successor to a business founded in 1870 as a partnership and later incorporated under the laws of the Commonwealth of Kentucky in 1901. We primarily manufacture, bottle, import, export, market, and sell a wide variety of alcoholic beverages under recognized brands. We employ approximately 4,700 people on six continents (excluding individuals that work on a part-time or temporary basis), including approximately 1,200 people in Louisville, Kentucky, USA, home of our world headquarters. We are the largest American-owned spirits and wine company with global reach.
Overview of Brown-Forman's 4th quarter 2020 earnings
The numbers below refers to the latest quarter unless specified otherwise
- Net sales: $709 million (down from $744 million for the same quarter of the previous year)
- Net sales decreased by -5% over the last 12 months
- Cost of sales: $256 million (down from $262 million for the same quarter of the previous year)
- Cost of sales decreased by -2% over the last 12 months
- Net income: $128 million (down -20% from $159 million for the same quarter of the previous year)
- Diluted earnings per share: $0.27 (down -20% from $0.33 for the same quarter of the previous year)
- Cash dividends paid per common share: $0.1743
- Dividend yield: 1%
- Shares in issue: 480.047 million
- Cash and cash equivalents: $675 million
- Cash and cash equivalents per share: $1.41
- Cash and cash equivalents makes up 2% of Brown-Forman's market capital
- Cash and cash equivalents makes up 11.7% of Brown-Forman's total assets
- Cash and cash equivalents per share: $1.41
- Inventories: $1.685 billion
- Inventories makes up 29.2% of Brown-Forman's total assets
- Goodwill of Brown-Forman: $756 million
- Goodwill per share: $1.57
- Goodwill makes up 13.1% of Brown-Forman's total assets
- Stockholders’ equity: $1.975 billion
- Stockholders equity per share: $4.11
- So Brown-Forman is trading at times its stockholders equity per share, which is well outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7
- Cash generated from operations for full fiscal year : $724 million
- Cash generated per share: $0.15
Brown-Forman commentary on their 4th quarter 2020 earnings
LOUISVILLE, Ky.--(BUSINESS WIRE)-- Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its fourth quarter and fiscal year ended April 30, 2020. For the fourth quarter, the company’s reported net sales declined 5% to $709 million (-10% on an underlying basis) compared to the same prior-year period. Reported operating income decreased 18% to $187 million (-27% on an underlying basis) and diluted earnings per share declined 20% to $0.27.
First, I speak on behalf of the entire Brown-Forman family in saying that our hearts and thoughts are with all who have been so deeply affected by COVID-19. While this is a business challenge, it is, above all, a human tragedy. I would like to thank our 4,800 employees for their exceptional agility and creativity in quickly shifting and adapting to the recent events in such a short period of time,” said Lawson Whiting, President and Chief Executive Officer. He added, “Brown-Forman has endured and prevailed through many challenges over the last 150 years. We believe we are well positioned to successfully navigate the environment we face today and emerge stronger thanks to the continued support of our shareholders, including the Brown family, our healthy balance sheet, the resilience of our people, and the strength of our brands.”
Fiscal 2020 Highlights
First, I speak on behalf of the entire Brown-Forman family in saying that our hearts and thoughts are with all who have been so deeply affected by COVID-19. While this is a business challenge, it is, above all, a human tragedy. I would like to thank our 4,800 employees for their exceptional agility and creativity in quickly shifting and adapting to the recent events in such a short period of time,” said Lawson Whiting, President and Chief Executive Officer. He added, “Brown-Forman has endured and prevailed through many challenges over the last 150 years. We believe we are well positioned to successfully navigate the environment we face today and emerge stronger thanks to the continued support of our shareholders, including the Brown family, our healthy balance sheet, the resilience of our people, and the strength of our brands.”
Fiscal 2020 Highlights
- Underlying net sales were flat (+1% reported) in a year marked by significant disruption
- The United States, our largest market, grew underlying net sales 5% (+8% reported), while our developed international and emerging markets each declined 1% (-2% and -4% reported, respectively)
- Jack Daniel’s family of brands underlying net sales were flat (+1% reported). Underlying net sales growth from Jack Daniel’s Tennessee Apple, Jack Daniel’s RTDs3,and Jack Daniel’s Tennessee Honey was offset by declines in Jack Daniel’s Tennessee Whiskey
- Premium bourbons grew underlying net sales 21% (+24% reported) led by Woodford Reserve’s 19% underlying net sales growth (+23% reported) and supported by even stronger underlying growth from Old Forester, the company’s founding brand, which is celebrating its 150th year
- Our tequila portfolio grew underlying net sales 2% (+5% reported) as high single-digit growth in the U.S. was partially offset by declines in Mexico. Herradura grew underlying net sales 7% (+11% reported) and el Jimador grew underlying net sales 5% (+8% reported), while underlying net sales for New Mix declined.
- Non-branded and bulk underlying net sales declined 29% (-30% reported) primarily reflecting lower used barrel demand and pricing along with a reduction in bulk whiskey sales
- Brown-Forman generated an ROIC3of 20%
Business Environment Update Amid COVID-19 Pandemic
The company completed its third quarter of the fiscal year on January 31, 2020, registering a year-to-date net sales increase of 3% on both a reported and underlying basis with underlying net sales trends holding through February. In early March, the company revised its full-year outlook to include an estimate for the impact of COVID-19 on its results from Asia, most notably China, and Travel Retail only. Subsequent to that time, the rapid spread of the virus resulted in all of the company’s major markets being negatively affected.
“COVID-19 began to affect our performance in the middle of March and continued throughout April as both on-premise, representing approximately 20% of our business globally, and Travel Retail channels essentially came to a halt. We experienced strong growth in the off-premise (based on syndicated takeaway data) and e-Premise channels across most of our developed markets as country lockdowns and government restrictions took hold reflecting both an increase in at-home consumption and some pantry loading,” said Jane Morreau, the company’s Executive Vice President and Chief Financial Officer.
Financial Stewardship
On May 21, 2020, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.1743 per share on the Class A and Class B common stock, resulting in an annualized cash dividend of $0.6972 per share. The quarterly cash dividend is payable on July 1, 2020, to stockholders of record on June 8, 2020. Brown-Forman has paid regular quarterly cash dividends for 75 consecutive years and has increased the dividend for 36 uninterrupted years.
Fiscal Year 2021 Outlook
The company faces substantial uncertainty related to the evolving COVID-19 pandemic and its effect on the global economy. As a result of this uncertainty, the company is not able to provide quantitative guidance for fiscal year 2021 at this time. With a strong balance sheet, solid cash flows, and ample liquidity, the company expects to fully fund ongoing investments in the business and pay regular dividends. Whiting added, “with our attractive portfolio of brands in growing categories and our resilient supply chain, we believe we will successfully navigate these uncharted waters, similar to other challenges we have encountered over the past 150 years, and emerge an even stronger company with healthier brands to drive our growth in the future.”
The company completed its third quarter of the fiscal year on January 31, 2020, registering a year-to-date net sales increase of 3% on both a reported and underlying basis with underlying net sales trends holding through February. In early March, the company revised its full-year outlook to include an estimate for the impact of COVID-19 on its results from Asia, most notably China, and Travel Retail only. Subsequent to that time, the rapid spread of the virus resulted in all of the company’s major markets being negatively affected.
“COVID-19 began to affect our performance in the middle of March and continued throughout April as both on-premise, representing approximately 20% of our business globally, and Travel Retail channels essentially came to a halt. We experienced strong growth in the off-premise (based on syndicated takeaway data) and e-Premise channels across most of our developed markets as country lockdowns and government restrictions took hold reflecting both an increase in at-home consumption and some pantry loading,” said Jane Morreau, the company’s Executive Vice President and Chief Financial Officer.
Financial Stewardship
On May 21, 2020, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.1743 per share on the Class A and Class B common stock, resulting in an annualized cash dividend of $0.6972 per share. The quarterly cash dividend is payable on July 1, 2020, to stockholders of record on June 8, 2020. Brown-Forman has paid regular quarterly cash dividends for 75 consecutive years and has increased the dividend for 36 uninterrupted years.
Fiscal Year 2021 Outlook
The company faces substantial uncertainty related to the evolving COVID-19 pandemic and its effect on the global economy. As a result of this uncertainty, the company is not able to provide quantitative guidance for fiscal year 2021 at this time. With a strong balance sheet, solid cash flows, and ample liquidity, the company expects to fully fund ongoing investments in the business and pay regular dividends. Whiting added, “with our attractive portfolio of brands in growing categories and our resilient supply chain, we believe we will successfully navigate these uncharted waters, similar to other challenges we have encountered over the past 150 years, and emerge an even stronger company with healthier brands to drive our growth in the future.”
Brown-Forman's company (NYSE: BF.B) stock price history
The image below shows the stock price history of Brown-Forman over the last 5 years. 5 years ago the stock price was around $39.30 a stock and its currently trading at $70.07 a stock. That's a very strong return of % provided to Brown-Forman stockholders over the last 5 years.
The stock of Brown-Forman is trading at a lot closer to its 52 week high of $72.85 than it is to its 52 week low of $44.68 which to us is a clear indication that the short term sentiment and momentum of Brown-Forman stock is positive
The stock of Brown-Forman is trading at a lot closer to its 52 week high of $72.85 than it is to its 52 week low of $44.68 which to us is a clear indication that the short term sentiment and momentum of Brown-Forman stock is positive
Brown-Forman (BF.B) stock vs Diageo (DGE) stock
The image below shows the stock price performance of Brown-Forman (BF.B) and that of rival distillery Diageo (DGE) over the last 3 years. Over the last 3 years the stock of Brown-Forman provided a return of 28.32% while the stock of Diageo provided a return of 22.36%. So while it is a close contest between the two competitors Brown-Forman managed to just outperform the stock of Diageo.
Recent coverage of Brown-Forman
The extract below covers the latest regarding Brown-Forman as obtained from MarketWatch
Shares of Brown-Forman Corp. BF.B, 3.93% BF.A, +3.89% edged up 0.4% in premarket trading Tuesday, after the parent of alcoholic beverage brands including Jack Daniel's, Finlandia and Korbel reported a fiscal fourth-quarter profit that missed expectations, while sales fell less than forecast helped by "strong growth" in off-premise and e-premise sales. Net income fell to $128 million, or 27 cents a share, from $159 million, or 33 cents a share, in the year-ago period. The FactSet consensus for earnings per share was 28 cents. Sales dropped 5% to $709 million, but was above the FactSet consensus of $682 million. The company said the COVID-19 pandemic started negatively affecting business in mid-March, as on-premise sales, which represent about 20% of its business, and travel retail sales "essentially came to a halt." For fiscal 2020, whiskey sales grew 3%, with Jack Daniel's sales up 1%; premium bourbon brands underlying sales grew in the double-digit percentage range and tequila sales rose 5%. The company is not providing fiscal 2021 financial guidance given uncertainties related to the COVID-19 pandemic. The stock has gained 0.5% year to date through Monday, while the S&P 500 SPX, -0.43% edged up 0.1%.
Read the full article here
Shares of Brown-Forman Corp. BF.B, 3.93% BF.A, +3.89% edged up 0.4% in premarket trading Tuesday, after the parent of alcoholic beverage brands including Jack Daniel's, Finlandia and Korbel reported a fiscal fourth-quarter profit that missed expectations, while sales fell less than forecast helped by "strong growth" in off-premise and e-premise sales. Net income fell to $128 million, or 27 cents a share, from $159 million, or 33 cents a share, in the year-ago period. The FactSet consensus for earnings per share was 28 cents. Sales dropped 5% to $709 million, but was above the FactSet consensus of $682 million. The company said the COVID-19 pandemic started negatively affecting business in mid-March, as on-premise sales, which represent about 20% of its business, and travel retail sales "essentially came to a halt." For fiscal 2020, whiskey sales grew 3%, with Jack Daniel's sales up 1%; premium bourbon brands underlying sales grew in the double-digit percentage range and tequila sales rose 5%. The company is not providing fiscal 2021 financial guidance given uncertainties related to the COVID-19 pandemic. The stock has gained 0.5% year to date through Monday, while the S&P 500 SPX, -0.43% edged up 0.1%.
Read the full article here
Brown-Forman (NYSE: BF.B) latest stock valuation
Based on the Brown-Forman's 4th quarter 2020 earnings report what do we value the group's stock at? Based on their earnings reported our valuation model prices a target price (full value price) for Brown-Forman stock at $64.20 a stock.
We therefore believe the stock of Brown-Forman is overvalued.
We usually recommend that long term and value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $64.20, a good entry point would therefore be at $57.80 or below. We expect the stock of Brown-Forman to pull back slightly from its current price to levels closer to our target price (full value price) in coming weeks and months.
We therefore believe the stock of Brown-Forman is overvalued.
We usually recommend that long term and value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $64.20, a good entry point would therefore be at $57.80 or below. We expect the stock of Brown-Forman to pull back slightly from its current price to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release of Brown-Forman
It is expected that Brown-Forman will release their 1st quarter 2021 earnings report in mid September 2020