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business newsBrown-Forman Shares End Solidly in the Black, Jack
By
Justin Sharon
Mar 08, 2011 4:50 pm
The whiskey giant hit an all time high, up 4.82% after impressive fiscal third quarter earnings.
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The JD portfolio of brands, which represents a hefty 43% of overall volume for the firm, grew reported and constant currency net sales by 9% worldwide. This strong showing propelled overall per share profit up 30% to $0.96, besting analyst expectations by a dime. Sales rose to $962.4 million, some $80.4 million ahead of what researchers were expecting; Wall Street obviously needs to better acquaint itself with Bourbon Street. (Though perhaps not now -- it is Fat Tuesday after all.) Gross margin also gapped up to 48.2% from 47.7%.
Results were boosted by a solid international showing from the whiskey giant, whose other brands include Southern Comfort, Finlandia Vodka, Antiguo Tequila, Chambord Liqueur, and Korbel champagne. The alcohol outfit got fully 53% of its 2010 revenues from overseas, up from less than 25% a decade ago, and good growth opportunities still exist in both developed and emerging global markets.
Domestic sales, though still “soft” in the assessment of CEO Paul Varga, do show signs of rebounding with an improving economy, and company management are “encouraged by the improving top line results in the United States.” Going forward, Brown-Forman also encouragingly increased its 2011 guidance and now expects to earn in a range of $3.34 to $3.45, well above prior projections of $3.31.
Headwinds that could cause a hangover? Rising commodity costs may soon start to negatively impact the bottom line, consumer trade-down to less expensive spirits is a constant concern, and shares look slightly frothy at current levels.
After we see some ID, please look into The Men Behind the Liquor Labels, Ethanol: Ruining Tequila For Everyone, and Diageo Profit Rises 7% on Discount Vodka.
I am starting to think there may be some subliminal buy and sell messages embedded in Oscar attire. When Iceland’s Björk walked down the red carpet wearing a swan one year, looking back it was obviously a ominous harbinger of economic black swans shortly forthcoming from her country. And American Express (AXP), today’s second best performing Dow member with a 3.50% gain, has hardly looked back since an Academy Award winner outfitted herself entirely in its gold cards. Tomorrow marks two years since the post-Lehman low in equities, at which point shares of the charge card king could be had for less than $10. Amex has since been one of the market’s top stocks and it now stands over $45. Impressive stuff, especially when one considers we are no longer living in an era of American excess.
Indeed, only yesterday new consumer data for January revealed credit card usage fell to a fresh seven-year low. This company has manged to buck the trend with both a best-in-class brand and attractive rewards program. The acceptance rate of its cards among key merchants are on the rise due to some astute relationship management with third-party vendors. Its write-offs/average loans ratio is also expected to decline to a more than manageable 4.5% in 2011.
Red flags include regulatory risks, a saturated marketplace, and any rise in delinquencies should the economy backslide.
Read related content at llusionist Apparently Makes American Express Bills Disappear, In Ten Years: American Express, and Don’t Cut It Up! Why Credit Cards Still Matter.
When Kevin Costner memorably answered the inquiry “Is this Heaven?” by saying no, “It’s Iowa” in Field of Dreams, he spoke for all of us who hold the heartland dear. Alas Casey’s General Stores Inc. (CASY), which calls the Hawkeye State home, had a hellish afternoon. (Redundant proof, perhaps, that this well meaning actor nonetheless makes a lousy financial adviser.) Shares of the convenience store operator, whose mainly private competitors include 7-Eleven, ended 7.37% underwater after disappointing quarterly earnings and a downgrade.
Feltl & Company cut the shares, albeit only to Buy from Strong Buy, after adjusted third-quarter results of $0.37 came in an unlucky $0.13 below consensus estimates. Casey’s said higher credit card fees, ironically the same scenario which helps our second stock, exerted a negative impact and sent operating expenses up 18.5%. Costs from the rapid addition of new outposts also hurt the quarter, although CEO Robert Myers said, “We still expect these stores to be highly accretive to earnings in their first full year of operation.” Higher prices at the pump could also crimp margins, with Keegan & Company analyst Ben Brownlow opining, “It is impossible to avoid any impact when oil and gas prices keep increasing every week.”
The top-line did however grow 23% in the quarter, and traffic ticked up 5.0%, suggesting today’s slump is excessive.
Not Made in the USA: 7-Eleven, Iowa Prisoners to Make Own Toilet Paper, and How Does Kevin Costner’s Oil Cleaning Machine Work, Exactly? have more.
From farm country to Urban Outfitters Inc. (URBN). No brotherly love for this Philadelphia apparel outfit, which ended the afternoon as the S&P 500′s single worst stock, sliding 16.97% on an otherwise up day in equities.
If Warren Buffett’s acquisition “elephant gun” is indeed loaded, it’s extremely unlikely he views the specialty retailer as an attractive takeover target, notwithstanding their own odd affinity for firearms. Its fourth-quarter per share earnings of $0.45 fell some $0.07 shy of what Wall Street was looking for, causing Suntrust to take down its rating this morning. Gross margin also came in below forecasts, falling by 208 basis points with seasonal clearance and a higher tax rate each contributing about $0.03 to the shortfall. Shifting trends in women’s fashion also caught the company off guard, although optimists can point to good square footage growth especially at its Anthropologie unit.
Today however, insult was added to injury for Urban when its arch rival Abercrombie & Fitch (ANF) flirted with a fresh 52-week peak after scoring an analyst upgrade.
Also check out Urban Outfitters Punks Us With New Logo, Why Abercrombie’s Second Quarter Sales Increase Isn’t Impressive, and Beware of Monopoly Stocks.
No positions in stocks mentioned.
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