Brown-Forman (BF.B) Q1 Earnings: Will Dismal Trends Persist?

Brown-Forman Corporation BF.B, the leading producer and distributor of premium alcoholic beverages, is set to report first-quarter fiscal 2018 results on Aug 30, before the market opens. Investors are keen to know whether the company will post a positive earnings surprise in the to-be-reported quarter, after missing the same in the preceding two quarters. In the trailing four quarters, Brown-Forman has posted average negative earnings surprise of 2.5%.

Let’s now have a look at how things are shaping up for this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is 39 cents, reflecting a year-over year growth of 7.8%. We note that the Zacks Consensus Estimate has been stable in the past 30 days. However, analysts polled by Zacks expect revenues of $688.7 million, up about 4.2% from the year-ago quarter.

Factors at Play

Brown-Forman gains strength from its strong portfolio of premium American whiskey brands, along with its Jack Daniel's trademark. The company expects to grow on the back of strong demand for its authentic American whiskey brands worldwide, consumer interest in flavored whiskey and a growing trend in premium spirits. Its consistent focus on pricing, product innovation and expansion reinforce its market position.

However, the company has been witnessing a rough phase due to its dismal earnings and sales trend, primarily hurt by currency headwinds. Notably, the company has lagged earnings and sales estimates in three of the trailing four quarters. Further, Brown-Forman forecasts currency headwinds to continue in fiscal 2018 and are likely to negatively impact earnings and sales. The company also anticipates the volatility in global economy and the competitive landscape to continue to hurt results.

The cumulative effect of this dismal trend is visible on the company’s stock price, which has witnessed a 6.3% decline in the last three months. This also compares unfavorably with the industry’s 3.1% growth.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Brown-Forman to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Brown-Forman has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 39 cents. Although, the company has a Zacks Rank #3, which increases the predictive power of ESP, we need to have a positive ESP in order to be confident about earnings surprise.

Stocks Poised to Beat Earnings Estimates

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:

Big Lots, Inc. (NYSE:BIG) has an Earnings ESP of +0.72% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. (NYSE:BURL) has an Earnings ESP of +3.23% and a Zacks Rank #2.

Zumiez, Inc. (NASDAQ:ZUMZ) has an Earnings ESP of +16.67% and a Zacks Rank #3.

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