Brown-Forman (BF.B) To Report Q4: Can Earnings Surprise?

Brown-Forman Corporation BF.B is set to report fourth-quarter fiscal 2016 results on Jun 8. Last quarter, the company posted a positive earnings surprise of 1.1%.

However, the company has an average negative surprise of -0.14% 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 its fiscal 2016 results as well. Moreover, the company expects growth on sturdy 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. These along with tough economic conditions in emerging markets and a soft global retail network, weighed on its third-quarter fiscal 2016 results, in particular sales. Apart from lingering currency headwinds, the company indicated that future projections have become difficult in the face of an uncertain global economic environment and its impact on businesses. Consequently, management lowered its sales and earnings outlook for fiscal 2016. Moreover, stiff competition and any rise in excise taxes remain 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 73 cents.

Zacks Rank: Brown-Forman carries a Zacks Rank #2 (Buy). Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

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 J. M. Smucker Company (NYSE:SJM) , scheduled to report earnings on Jun 9, has an Earnings ESP of +0.84% and a Zacks Rank #3 (Hold).

Constellation Brands Inc. (NYSE:STZ) , slated to report earnings on Jun 30, has an Earnings ESP of +1.97% and a Zacks Rank #2.

Pepsico Inc. (NYSE:PEP) , expected to report earnings on Jul 14, has an Earnings ESP of +1.56% and a Zacks Rank #3.