Alcohol company Brown-Forman (NYSE:BF.B) fell short of analysts' expectations in Q2 FY2024, with revenue up 1.2% year on year to $1.11 billion. It made a GAAP profit of $0.50 per share, improving from its profit of $0.47 per share in the same quarter last year.
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Brown-Forman (BF.B) Q2 FY2024 Highlights:
- Revenue: $1.11 billion vs analyst estimates of $1.15 billion (3.7% miss)
- EPS: $0.50 vs analyst expectations of $0.50 (small miss)
- Free Cash Flow of $29 million is up from -$11 million in the previous quarter
- Gross Margin (GAAP): 60.6%, up from 56% in the same quarter last year
- Organic Revenue was down 1% year on year
Best known for its Jack Daniel’s whiskey, Brown-Forman (NYSE:BF.B) is an alcoholic beverage company with a broad portfolio of brands in wines and spirits.
Beverages and AlcoholThe beverages and alcohol category encompasses companies engaged in the production, distribution, and sale of refreshments like beer, wine, and spirits, along with soft drinks, juices, and bottled water. These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas.
The industry is highly competitive, with a diverse range of products from large multinational corporations, niche brands, and startups vying for market share. It's also subject to varying degrees of government regulation and taxation, especially for alcoholic beverages.
Sales GrowthBrown-Forman is larger than most consumer staples companies and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 8.5% over the last three years was decent for a consumer staples business.
This quarter, Brown-Forman's revenue grew 1.2% year on year to $1.11 billion, falling short of Wall Street's estimates. Looking ahead, analysts expect sales to grow 7% over the next 12 months.
Organic Revenue GrowthWhen analyzing revenue growth, we care most about organic revenue growth. This metric captures a business's performance excluding the impacts of foreign currency fluctuations and one-time events such as mergers, acquisitions, and divestitures.
Brown-Forman's demand has outpaced the broader consumer staples sector over the last eight quarters. On average, the company has posted year-on-year organic revenue growth of 11.5%.
In the latest quarter, Brown-Forman's year on year organic sales were flat. By the company's standards, this growth was a meaningful deceleration from the 16% year-on-year increase it posted 12 months ago. We'll be watching Brown-Forman closely to see if it can reaccelerate growth.
Key Takeaways from Brown-Forman's Q2 Results Sporting a market capitalization of $29.16 billion, more than $373 million in cash on hand, and positive free cash flow over the last 12 months, we believe that Brown-Forman is attractively positioned to invest in growth.
We enjoyed seeing Brown-Forman exceed analysts' gross margin expectations this quarter. That stood out as a positive in these results. On the other hand, its revenue missed Wall Street's estimates, and management lowered its full-year revenue and operating income guidance, citing that "global macroeconomic conditions continue to create a challenging operating environment tempering expectation[s]". Overall, this was a mixed quarter for Brown-Forman. The company is down 9.7% on the weak outlook and currently trades at $54.36 per share.