Brown-Forman Q2 Profit Edges Up, But Misses View; Lowers 2015 Earnings Outlook

(RTTNews) - Alcoholic beverage manufacturer Brown-Forman Corp. (BF-B, BF-A) on Wednesday reported a 1 percent increase in profit for the second quarter from last year, as higher sales were offset the negative impact of foreign exchange.

Both earnings per share and quarterly net sales missed analysts' expectations. Looking ahead, the company lowered its earnings outlook for fiscal 2015, but reaffirmed its underlying growth outlook.

Brown-Forman sells more than 35 brands, including Jack Daniel's and Canadian Mist as well as Finlandia Vodka, Southern Comfort Liqueur, Sonoma-Cutrer wines, Don Eduardo Tequilas, and Korbel California Champagnes.

Paul Varga, chief executive officer of Brown-Forman, said, "Brown-Forman's top-tier underlying results in the first half were roughly in-line with our expectations, despite the backdrop of a tough trading environment for our industry. As anticipated, underlying net sales growth accelerated in our second quarter, and we believe that underlying trends remain favorable as we head into the important holiday selling season."

The Louisville, Kentucky-based company reported net income for the second quarter of $208 million or $0.97 per share, up from $206 million or $0.96 per share in the prior-year quarter.

On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $1.04 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 5 percent to $1.14 billion from $1.08 billion in the same quarter last year. Underlying net sales for the quarter rose 7 percent. Analyst had a consensus revenue estimate of $1.15 billion.

Gross margin for the quarter edged up 20 basis points to 53.6 percent, while operating margin declined 220 basis points to 26.6 percent.

Operating income for the quarter declined 3 percent from the year-ago period to $303 million. The company noted that foreign exchange negatively impacted reported operating income growth by ten percentage points in the quarter.

Looking ahead to fiscal 2015, Brown-Forman lowered its outlook for earnings to a range of $3.15 to $3.35 per share from the prior range of $3.25 to $3.45 per share.

The revised outlook now incorporates an anticipated negative impact from foreign exchange of about $0.15 per share, compared to the first-quarter outlook for a $0.06 per share negative impact from foreign exchange.

However, the company reaffirmed its underlying growth outlook for fiscal 2015, including 6 to 8 percent growth in underlying net sales, and 9 to 11 percent growth in underlying operating income.

Street is currently looking for earnings of $3.36 per share for the year on revenue growth of 6.3 percent to $4.20 billion.

Varga added, "While we have updated our guidance to reflect the significant impact expected from adverse foreign exchange, we still anticipate growing both underlying net sales and underlying operating income within the range provided in our original full-year outlook."

Brown-Forman said that following a favorable consumer and trade response to Jack Daniel's Tennessee Fire in its limited test, it will launch the nation-wide roll-out of the brand in the U.S. during the fourth quarter of fiscal 2015.

BF-A closed Tuesday's trading at $95.77, up $0.95 on a volume of 5,320 shares.

BF-B closed Tuesday's trading at $96.00, up $0.74 on a volume of 0.61 million shares. In Wednesday's pre-market trades, the stock is down $0.15 or 0.16 percent to $95.85.