Analyst Note| Nicholas Johnson, CFA |
The stage was set for another knockout showing from wide-moat Brown-Forman, with the shares near 52-week highs heading into the fiscal second-quarter earnings release. However, results were lukewarm, with revenue ahead and earnings slightly behind CapIQ consensus. Strength in the United States continues to mitigate top-line headwinds in other geographies, but margins are starting to be less inoculated against the COVID-19 crisis. We’ll likely raise our $64 fair value estimate modestly to reflect time value as well as additional financial color to be divulged in the 10-Q filing. Still, we believe the current valuation is stretched, with the implied assumptions sitting in the tails of the distribution of potential outcomes for the firm.