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Brown-Forman Corp Class B BF.B

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Morningstar’s Analysis

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Economic Moat


Capital Allocation


Input Cost Inflation and Sales Growth Offset for Brown-Forman; Shares Appear Fairly Priced

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Wide-moat Brown-Forman reported strong sales growth in its fiscal first quarter, with $906 million in net revenue, up 20% from the year-ago period. While the firm benefited from downstream partners building inventory, momentum in premium beverages remains alluring, with underlying growth in premium bourbons (up 36% from a year ago), Herradura (up 81%), and Jack Daniel's Tennessee Apple (up 35%) driving results. Nonetheless, we slightly trim our fair value estimate to $72 per share from $73 as we adjust for tepid gross margin guidance (to flat with 2021 levels, from up slightly) and a somewhat higher effective tax rate, leaving shares fully valued.

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Company Profile

Business Description

Brown-Forman is the largest U.S.-domiciled producer of distilled spirits. The firm reports only a single operating segment, and whiskey represents its primary business driver at over 75% of revenue, undergirded by the Jack Daniel’s brand as well as bourbons such as Woodford Reserve and Old Forrester. Notable nonwhiskey offerings include vodkas such as Finlandia and tequilas such as el Jimador and Herradura. The firm operates globally, with products sold in more than 170 countries, and adapts its route-to-consumer model depending on regulation as well as the prevailing competitive dynamics in a given market. For example, it sells through distributors in the U.S., but operates its own logistics apparatus in many other countries. The company remains under the control of the Brown family.

850 Dixie Highway
Louisville, KY, 40210
T +1 502 585-1100
Sector Consumer Defensive
Industry Beverages - Wineries & Distilleries
Most Recent Earnings Jul 31, 2021
Fiscal Year End Apr 30, 2022
Stock Type Classic Growth
Employees 4,700