Morningstar sticks with a fair market value of $43 on Brown-Forman (BF.A, BF.B) after analyzing Q2 results.
"Several factors in the first quarter suggest downside risk, and highlight the lack of margin of safety in the market price," writes the analyst team
"The company’s Tennessee Fire brand saw double-digit net sales declines in the U.S., following a national roll-out a year ago. The company is still expanding the line extension internationally, but underlying net sales nonetheless fell 2% year-over-year. An inability to successfully drive innovative products could limit the firm’s volume gains, particularly given Jack Daniel’s Tennessee Whiskey volume grew only 2% in the quarter."
Morningstar has Brown-Forman rated with 2 stars out of five possible.
Global alcohol makers are bracing for a potentially precedent-setting court decision in Scotland over whether the country will become the first to implement a floor on alcohol prices - a move the industry feels could unleash an international wave of regulation.
After years of the case bouncing around the legal system, the Court of Session will hold a hearing on minimum unit pricing tomorrow and is expected to make a decision by August.
BF's whiskey brands, which include Jack Daniels, are benefiting from a surge in U.S. demand that has sent the spirit past vodka in global popularity, whcih has prompted the company to prune its brands to focus almost exclusively on whiskey and tequila.
BF spent more than $200M during 2000-04 as it acquired Finlandia in stages.