Bearish stock to watch: Brown-Forman Corporation Class B (NYSE: BF.B)

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Brown-Forman Corporation Class B (NYSE: BF.B) stock lost over 1% on 10th June, 2020 (as of 11:10 am GMT-4; Source: Google finance) after the company posted mixed results for the fourth quarter of FY 20. BF.B in the fourth quarter of FY 20 has reported the adjusted earnings per share of 27 cents, missing the analysts’ estimates for the adjusted earnings per share of 28 cents, according to the Zacks Consensus Estimate. The company had reported 5 percent fall in the adjusted revenue to $709 billion in the fourth quarter of FY 20. The company reported 18% fall in the operating income to $187 million & -27% on an underlying basis. Travel Retail’s underlying net sales fell by 10% mainly due to the unprecedented implementation of travel bans and restrictions caused by the pandemic.

BF.B ended fiscal 2020 with cash and cash equivalents of $675 million, and long-term debt of $2,269 million. Its total shareholders’ equity stood at $1,975 million at the end of April, 2020. In fiscal 2020 & it generated $724 million in cash from operating activities. Due to uncertainty, the company is did not provide quantitative guidance for fiscal year 2021. COVID-19 began to affect the company’s performance in the middle of March and continued throughout April as both on-premise, that represents about 20% of the business globally, and Travel Retail channels came to a standstill.

Moreover, the company posted 5% rise in the underlying net sales growth in the United States in fiscal 2020, on the back of in part by the fall 2019 launch of Jack Daniel’s Tennessee Apple, despite slower growth in the fourth quarter as COVID-19 related impacts began to take effect. Double-digit underlying net sales growth for Woodford Reserve, Old Forester, Jack Daniel’s RTDs, Herradura, and el Jimador collectively, also led to the growth for the year. Underlying net sales in the company’s emerging markets had fallen by 1% as the mid-single digit underlying net sales increase till the third quarter of fiscal 2020 was more than offset by significant declines in the fourth quarter.

Additionally, the company has declared a quarterly cash dividend of 17.43 cents per share on Class A and Class B shares, which represents an annualized dividend rate of 69.72 cents. This dividend will be payable July 1, 2020, to shareholders of record as of June 8.

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