FO Fortune Brands

We currently maintain a long-term Outperform recommendation on Brown-Forman Corporation (BF.B) with a target price of $77.00 per share.

Brown-Forman is one of the leading producers and distributors of premium alcoholic beverages in the world. The company, which competes with other well-established players in the industry, including Fortune Brands Inc. (FO), Constellation Brands Inc. (STZ) and Diageo plc (DEO), commands a strong portfolio of globally recognized brands, such as Jack Daniel's, Finlandia, Southern Comfort and Canadian Mist. This provides a competitive edge to the company and bolsters its well-established position in the market.

Further, Brown-Forman recorded strong operating performance in the first quarter of fiscal 2012. The company's adjusted earnings per share grew by an impressive 7% to 81 cents from 76 cents per share in the year-ago period, primarily driven by 12.8% growth in top-line, resulting from strong performance in the international market. Management also confirmed its fiscal 2012 earnings guidance range of $3.45 to $3.85 per share.

Moreover, Brown-Forman intends to expand Jack Daniel's market share in developed markets, such as France and the U.S., and emerging markets such as Russia, Poland, and Mexico, where the whiskey category is in early stages of development. In near future, the company also plans to expand the sphere of other brands, such as Gentleman Jack, Jack Daniel's Single Barrel and Jack Daniel's ready-to-drinks within Jack Daniel.

Additionally, the company has a consistent track record of returning cash to shareholders in the form of share repurchase and regular and special cash dividend payment. Brown-Forman has paid regular quarterly cash dividends consecutively for the past 65 years and has increased the same for the last 26 years.

In first-quarter 2012, Brown-Forman disbursed $44.0 million toward regular cash dividend. Moreover, during the quarter, the company repurchased shares worth $15.0 million under the $250.0 million share repurchases program, which will expire on November 30, 2011.

Currently, Brown-Forman has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

 
BROWN FORMAN B (BF.B): Free Stock Analysis Report
 
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