Wide-Moat Brown-Forman Swallows Input Costs, Foreign Exchange Headwinds; Long-Term Outlook Unchanged

We plan to lower our $78 fair value estimate on wide-moat Brown-Forman by a mid-single-digit percentage after digesting its October-ended fiscal 2023 second-quarter results, approximately in line with the decline in its shares on Dec. 7. The alcoholic beverage giant delivered 16% organic top-line growth in the quarter, but, due to tougher second-half comparisons, inflation pressuring margins, and normalizing downstream inventory levels, we expect a meaningful slowdown in second half-results.