Brown-Forman Q2 Earnings Expected to Rise: Buy Now or Stay Away?

Brown-Forman Corporation (BF.B) is slated to release second-quarter fiscal 2025 results on Dec. 5. The alcoholic beverage bigwig’s earnings per share (EPS) are expected to have risen in the to-be-reported quarter. The consensus mark for BF.B’s EPS is pegged at 51 cents, indicating growth of 2% from the year-ago period’s reported number. The EPS estimates for the fiscal second quarter have been unchanged in the past 30 days.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $1.08 billion, indicating a decline of 2.3% from the year-ago quarter’s reported figure.In the last reported quarter, the company delivered a negative earnings surprise of 10.9%. In the trailing four quarters, BF.B delivered an earnings surprise of 7.4%, on average.Brown-Forman Corporation Price and EPS Surprise Brown-Forman Corporation price-eps-surprise | Brown-Forman Corporation QuoteBrown-Forman’s Zacks Model FindingsOur proven model does not conclusively predict an earnings beat for Brown-Forman this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Brown-Forman has an Earnings ESP of -1.06% and a Zacks Rank #4 (Sell) at present.Key Factors to Note Ahead of BF.B’s Earnings ReleaseBrown-Forman has been grappling with soft performance due to lower volumes across brands and regions, which have been a significant drag on its top and bottom lines. The company's first-quarter fiscal 2025 results highlighted these struggles, with both revenues and earnings falling short of expectations.The company has been experiencing weaker sales trends across all geographic regions due to more favorable shipment timings in the previous year, which were linked to inventory replenishment and the implementation of its pricing strategy. Persistence of these factors is anticipated to have weighed on second-quarter fiscal 2025 sales performance. Additionally, sales in the fiscal second quarter are expected to have indicated continued soft trends for Jack Daniel’s Tennessee Whiskey and the impacts of the Finlandia divestiture.Additionally, adverse margin trends have been weighing on the company’s bottom line. The timing of input cost fluctuations, high inventory levels and the transition services agreements related to the divestitures of Finlandia and Sonoma-Cutrer have been affecting Brown-Forman’s margins. After divesting Finlandia and Sonoma-Cutrer, BF.B established transition service agreements with the buyers to facilitate a smooth handover. However, these agreements have significantly reduced the company’s gross margin, as their profitability was much lower than the sale of finished products. We expect the impacts of the transition agreement and other factors to pull down margins in the to-be-reported quarter.However, Brown-Forman’s second-quarter fiscal 2025 results are expected to indicate the benefits of its portfolio premiumization strategy, pricing initiatives, revenue growth management strategies and aggressive brand investments. Gains across the company’s premium and super-premium brands are expected to have cushioned its top line to a great extent in the fiscal second quarter.On the last reported quarter’s earnings call, management stated that it was poised to deliver growth in organic sales and organic operating income in fiscal 2025, driven by gains in the international markets and the benefit of normalizing inventory trends. Brown-Forman remains confident in the strength of its portfolio, supported by the company’s pricing strategy and the continued global expansion of the portfolio across diverse regions. Gains from these initiatives are expected to have aided organic sales in the fiscal second quarter.BF.B Stock Price & Valuation PictureFrom a valuation perspective, Brown-Forman is trading at a premium relative to industry benchmarks. With a forward 12-month price-to-earnings ratio of 22.53x, which is below the five-year high of 47.17x but higher than the Beverages - Alcohol industry’s average of 15.93x.Recent market movements show that Brown-Forman’s shares have lost 27% year to date compared with the industry’s 17.3% decline.Image Source: Zacks Investment ResearchStocks With the Favorable CombinationHere are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:The Campbell's Company CPB currently has an Earnings ESP of +0.05% and a Zacks Rank #3. The company is anticipated to register top-line growth in first-quarter fiscal 2025. The Zacks Consensus Estimate for CPB’s quarterly revenues is pegged at $2.8 billion, indicating growth of 10.9% from the figure reported in the prior-year quarter. You can see the complete list of today's Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Campbell’s quarterly earnings has been unchanged in the past 30 days at 87 cents per share, implying 4.4% decline from the year-ago quarter's reported number. CPB delivered an earnings surprise of 4.3%, on average, in the trailing four quarters.Simply Good Foods SMPL currently has an Earnings ESP of +3.87% and a Zacks Rank #3. The company is expected to register top and bottom-line growth when it reports first-quarter fiscal 2025 numbers. The Zacks Consensus Estimate for Simply Good’s quarterly revenues is pegged at $347.3 million, which indicates growth of 12.5% from the figure reported in the prior-year quarter.The Zacks Consensus Estimate for SMPL’s quarterly earnings has moved up by a penny in the past 30 days to 45 cents per share, implying growth of 4.7% from the year-ago quarter's reported number. SMPL delivered an earnings surprise of 5.3%, on average, in the trailing four quarters.Chewy CHWY currently has an Earnings ESP of +2.67% and a Zacks Rank of 3. The company is expected to register top and bottom-line growth when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for CHWY quarterly revenues is pegged at $2.9 billion, which indicates growth of 4.5% from the figure reported in the prior-year quarter.The Zacks Consensus Estimate for Chewy’s earnings has been unchanged in the past 30 days at 23 cents per share, which implies growth of 53.3% from the figure reported in the prior-year quarter. CHWY has delivered an earnings surprise of 50.9%, on average, in the trailing four quarters.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. 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Click to get this free report Brown-Forman Corporation (BF.B): Free Stock Analysis Report The Campbell?s Company (CPB): Free Stock Analysis Report The Simply Good Foods Company (SMPL): Free Stock Analysis Report Chewy (CHWY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks