Tariffs a Key Risk for Jack Daniel's Maker Brown-Forman
There is considerable uncertainty around what retaliatory tariffs against American spirits would mean for the firm, and we see shares as overvalued.
There is considerable uncertainty around what retaliatory tariffs against American spirits would mean for the firm, and we see shares as overvalued.
Sonia Vora: Wide-moat Brown-Forman's fiscal 2018 results largely came in line with our expectations, with net sales up 8% and gross margin expanding 30 basis points to nearly 68%, resulting in diluted earnings per share of $1.48, which is comparable to our $1.50 estimate. We're maintaining our longer-term outlook, which calls for above 5% net sales growth and mid-30s average operating margin over our forecast. Despite a mid-single digit pullback in shares following the release, we'd suggest investors wait for a more attractive entry point.
Price and mix contributed around a third of the firm's underlying sales growth, consistent with our outlook for around 2% annual improvement in pricing over our forecast, as we expect a greater contribution from the firm's super-premium American whiskey portfolio (which grew underlying sales by 15% this year) will yield positive mix effects. The Jack Daniel's brand family, which accounted for roughly 60% of annual depletions, also remains healthy, with underlying net sales up 6%.
Sonia Vora does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.