Will Currency Woes Hit Brown-Forman (BF.B) Q1 Earnings?

Brown-Forman Corporation BF.B is set to report first-quarter fiscal 2017 results on Aug 31. Last quarter, the company posted a positive earnings surprise of 13.9%.

Moreover, the company has an average positive surprise of 3.65% over the trailing four quarters. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

Brown-Forman has been gaining from its strong portfolio of premium American whiskey brands, its Jack Daniel’s trademark and a balanced geographic approach. The company expects the trends that have been driving growth since fiscal 2012 to boost results going forward too. Moreover, the company expects growth on solid worldwide demand for authentic American whiskey brands, consumer interest in flavored whiskey and a rising trend in premium spirits.

However, Brown-Forman has been battling foreign currency headwinds for a while now, along with tough economic conditions in emerging markets and a soft travel retail network. These caused sales to decline year over year in the fiscal fourth quarter and the upcoming results may not be spared either. Also, Brown-Forman indicated that future projections have become difficult in the face of an uncertain global economic environment and its impact on business. The company expects currency headwinds to persist in fiscal 2017, which is expected to bear an about 7 cent per share negative impact on its earnings per share. Moreover, stiff competition and any rise in excise tax remain as concerns.

Earnings Whispers

Our proven model does not conclusively show that Brown-Forman is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP for Brown-Forman is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 37 cents.

Zacks Rank: Brown-Forman carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Kroger Co. (NYSE:KR) , scheduled to report earnings on Aug 9, has an Earnings ESP of +2.22% and a Zacks Rank #3 (Hold).

Casey's General Stores Inc. (NASDAQ:CASY) , expected to report earnings on Sep 13, has an Earnings ESP of +0.56% and a Zacks Rank #3.

Fortune Brands Home & Security Inc. (NYSE:FBHS) , expected to report earnings on Oct 19, has an Earnings ESP of +1.30% and a Zacks Rank #2 (Buy).