UPDATE 3-Brown-Forman to grow overseas with new drinks

Wed Jun 9, 2010 5:54pm EDT

* Q4 EPS $0.49 vs Wall Street estimate $0.53

* Sees opportunities to boost Jack Daniel's market share

* Sees FY11 EPS above views, excluding 15-cent forex hit

* Shares up 1.6 pct

(Recasts; Adds comments from company, analyst)

NEW YORK, June 9 (Reuters) - Brown-Forman Corp (BFb.N) forecast full-year earnings that could top Wall Street estimates as it expands its portfolio of alcoholic drinks and its overseas distribution.

The maker of Jack Daniel's whiskey, Finlandia vodka and Southern Comfort said on Wednesday it sees opportunities to increase Jack Daniel's market share in France and emerging markets such as Russia, Poland and Mexico, where drinking whiskey is still relatively new. It is also working to build distribution capabilities in Brazil.

"Emerging markets will continue to be an increasingly important part of our long-term growth story," said Brown-Forman Chief Financial Officer Don Berg on a conference call.

Brown-Forman shares closed up 1.6 percent at $58.11 on the New York Stock Exchange on Wednesday.

Brown-Forman said it expects earnings for the current year of $2.98 to $3.38 per share. Excluding a 15-cent per share hit from foreign currency translations, it expects to earn $3.13 to $3.53 per share. The mid-point of that range is $3.33 per share, which is ahead of analysts' average estimate of $3.30 a share, according to Thomson Reuters I/B/E/S.

Still, the company's stock already carries a high valuation compared with similar companies, one analyst said.

"Brown-Forman's growth coming out of the downturn is likely to be less than the market is pricing into peer-high valuation," said Morgan Stanley analyst Dara Mohsenian in a client note. "While results should improve going forward, our concern is that valuation is priced to perfection."

Mohsenian, who believes Brown-Forman "unsustainably cut back on investment during the downturn," has an "underweight" rating on the stock.

As of fiscal 2009, the company got 52 percent of its sales from outside the United States and 28 percent from Europe. The company does not break out its exposure to specific currencies, but said that for fiscal 2011, which began on May 1, a 10 percent move in overall exchange rates versus the U.S. dollar would lead to a 15 cent-per-share impact on earnings -- a benefit if the dollar weakens, and a further hit if it continues to strengthen.

FOURTH QUARTER MISSES ESTIMATES

In the fourth quarter ended April 30, profit fell to $72.7 million, or 49 cents a share, from $79.6 million, or 53 cents a share, a year earlier.

Analysts on average were expecting 53 cents a share, according to Thomson Reuters I/B/E/S.

Sales rose 7.3 percent to $733 million, beating analysts' estimates of $694.1 million.

Aside from expanding into new markets, the company is working to boost sales in the United States, where consumer spending at bars and restaurants remains muted. The company said it is rolling out premixed cocktails like Southern Comfort Lime and Southern Comfort Lemonade and that these drinks should boost growth this fiscal year.

(Reporting by Martinne Geller and Nivedita Bhattacharjee; Editing by Michele Gershberg and Lisa Von Ahn, Phil Berlowitz)

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