RBC Capital has revised its price target for Brown-Forman (BF.A, Financial), lowering it to $30 from the previous target of $44, while maintaining a Sector Perform rating. Despite low expectations, the company's recent quarterly performance fell short, and this has contributed to ongoing negative sentiment. According to analysts, the latest results signify a continued downward revision for the company.
Investors in Brown-Forman (BF.A, Financial) might remain frustrated and skeptical, as the anticipated timeline for recovery seems to be increasingly delayed. The company’s recent struggles indicate ongoing challenges in reversing its current trajectory.
BF.A Key Business Developments
Release Date: June 05, 2025
- Reported Net Sales: Decreased 5% in fiscal 2025.
- Organic Net Sales Growth: Increased 1% after adjustments.
- Woodford Reserve Organic Net Sales Growth: 8% increase.
- New Mix Organic Net Sales Growth: Double-digit growth, surpassing 11 million 9-liter cases.
- Jack Daniel's Tennessee Whiskey Organic Net Sales Growth: Increased 1%.
- Diplomatico Organic Net Sales Growth: Strong double-digit growth.
- Gin Mare Organic Net Sales Growth: 1% increase.
- Operating Income: Reported decrease of 22%; Organic growth of 3%.
- Gross Margin: Contracted by 150 basis points to 58.9%.
- Operating Expenses: Lower due to a 6% decrease in organic advertising expense and a 5% decrease in organic SG&A investment.
- Diluted Earnings Per Share: Decreased 14% to $1.84.
- Annualized Savings from Strategic Initiatives: Approximately $70 million to $80 million.
- Cash Received from Duckhorn Sale: $350 million.
- Dividends Paid: $420 million in fiscal 2025.
- Long-term Notes Repaid: $300 million.
- Fiscal 2026 Outlook for Organic Net Sales: Expected low single-digit decline.
- Fiscal 2026 Capital Expenditure Outlook: $125 million to $135 million.
- Fiscal 2026 Effective Tax Rate: Expected to be 21% to 23%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Woodford Reserve was the largest driver of organic net sales growth, with an 8% increase driven by higher volume and positive price mix.
- New Mix achieved double-digit organic net sales growth, surpassing 11 million 9-liter cases and gaining market share in Mexico.
- Jack Daniel's Tennessee Whiskey increased organic net sales by 1%, supported by new media campaigns and sponsorships.
- Diplomatico delivered strong double-digit organic net sales growth, particularly in France and Germany.
- Brown-Forman's emerging international markets collectively delivered a 9% organic net sales increase, led by Turkey and Brazil.
Negative Points
- Reported net sales decreased by 5% in fiscal 2025, with organic net sales growing only 1% after adjustments.
- Organic net sales in the travel retail channel declined by 5% due to challenging macroeconomic conditions in Asia.
- Developed international markets saw a 3% decline in organic net sales, with notable declines in Italy, South Korea, and the United Kingdom.
- Organic net sales for El Jimador and Herradura tequilas declined double-digits due to a competitive environment in the US and economic challenges in Mexico.
- Brown-Forman incurred $63 million in charges related to workforce reduction and Cooperage closing, impacting financial results.
