Brown-Forman Corporation (NYSE: BF.B) stock is trading subdued this morning and lost over 1.1% (as of 9:56AM EDT on June 7th, 2017; Source: Google finance). For the fourth quarter of FY 17, the group has reported a 5 percent fall in the net sales to $694 million (+4% on an underlying basis). The reported operating income fell 71% in the fourth quarter to $212 million (+13% on an underlying basis). The diluted earnings per share fell 71% to $0.37 compared to the prior-year period (-5% excluding acquisition and divestiture impact).
Moreover, at the end of the fourth quarter, the total debt grew to $2,149 million, from $1,501 million as of April 30th, 2016. The increase is primarily due to the issuance of two bonds in June of 2016, including €300M 1.2% 10-year notes and £300M 2.6% 12-year notes. On June 1st, BF.B closed the acquisition of the GlenDronach, BenRiach, and Glenglassaugh single malt scotch brands for aggregate consideration of $407 million.
Additionally, BF.B has declared a regular quarterly cash dividend of $0.1825 per share on its Class A and Class B common stock. In fiscal 2017, the company has also repurchased a total of 11.9 million Class A and Class B shares for $561 million at an average price of $47 per share. When combined with the $274 million of cash dividends paid, the company has returned $835 million to shareholders during the fiscal year 2017.
In addition, in FY 17, Brown-Forman has delivered the operating margin of 33%, an ROIC of 19% and a ten year TSR that compounded at 14% per year, well ahead of the competitive set and double the TSR of the S&P 500 Index over the same period.
For FY 18, Brown-Forman expects the underlying net sales growth of 4% to 5%, led by the Jack Daniel’s family of brands, the premium bourbon and tequila brands, and also due to the new products such as the launch of Jack Daniel’s Tennessee Rye and Slane Irish Whiskey, as well as seeding of the single malt scotch brands. The underlying operating income growth is expected in the range of 6% to 8%. Further, the diluted earnings per share is expected in the range of $1.80 to $1.90, which includes a modest negative impact from a higher tax rate, foreign exchange headwinds and setting up owned distribution in Spain. Furthermore, Brown-Forman is targeting three-year cost savings of $100 million (FY18-FY20) through better leveraging prior investments, including production capabilities, route to market initiatives, brand innovation, homeplace assets, and the people.
Brown-Forman stock has risen 6.3% in the last one year (as of 10:01AM EDT on June 7th, 2017; Source: Google Finance). But as per tipranks.com, BF.B has an average price target of $49, which is a further downside.