Brown-Forman, the company behind Jack Daniel’s Tennessee whiskey, recently reported its Q4 fiscal 2024 results, with revenues missing street estimates but earnings exceeding expectations. The company reported revenue of $964 million and earnings of $0.56 per share, compared to consensus estimates of $1.05 billion and $0.42, respectively. Despite a broadly in-line outlook for 2025, with sales expected to rise between 2% and 4%, the stock fell around 6% on June 5. Following the stock’s recent decline, many believe BF-B stock is undervalued, prompting a discussion on Brown-Forman’s stock performance, key takeaways from its recent results, and valuation.
Brown-Forman’s stock has seen a significant decline of 45% from early January 2021 to around $45 currently, while the S&P 500 has seen an increase of about 40% over the same period. The stock has experienced a poor run, losing value in each of the last three years, with returns of -8% in 2021, -10% in 2022, and -13% in 2023. This underperformance compared to the S&P 500 highlights the challenges faced by individual stocks in recent years, even for heavyweights in the Consumer Staples sector and megacap stars. In contrast, the Trefis High Quality Portfolio has outperformed the S&P 500 each year over the same period, showing better returns with less risk.
In light of the uncertain macroeconomic environment with high oil prices and elevated interest rates, there is concern about whether BF-B could potentially underperform the S&P over the next 12 months or see a recovery. However, from a valuation perspective, BF-B stock appears to have room for growth, with analysts’ average price estimate of $57 being around 30% above the current market price of $43.
In Q4, Brown-Forman reported a revenue of $964 million, down 8% year-over-year, with Jack Daniel’s Tennessee whiskey seeing a volume decline of 10% in fiscal 2024. Despite the overall liquor portfolio volume being down 8%, the gross margin expanded 150 basis points to 60.5%, and the operating margin surged 710 basis points to 33.8% in 2024. This was primarily attributed to a favorable product mix and lower supply chain disruption-related costs. Most of the decline in volume came from emerging markets, while travel retail saw slight growth.
Overall, despite the recent fall in its stock price, Brown-Forman appears attractive from a valuation perspective, trading at 5x trailing revenues compared to the last three-year average of 8x. As investors consider investing in BF-B stock, it is important to also examine how Brown-Forman’s peers are performing on key metrics. The company’s performance relative to its industry peers can provide valuable insights for potential investors looking to make informed decisions in the market.
