June 10, 2009 / 12:33 PM / 10 years ago

CORRECTED - UPDATE 2-Brown-Forman posts stronger-than-expected profit

(Corrects 9th paragraph to say forecast includes foreign exchange impact, not exclude)

* Q4 EPS 53 cts a share vs 49 cts analysts expected

* Sales fall 12 pct

* Sees 2010 EPS of $2.60 to $3 a share

* Shares up 3 pct (Adds CEO, analysts’ comments, details, background)

CHICAGO, June 10 (Reuters) - Brown-Forman Corp (BFb.N), the U.S. maker of Jack Daniel’s whiskey and Southern Comfort, on Wednesday reported a stronger-than-expected quarterly profit.

The company also said it expects modest growth in operating income in the current 2010 fiscal year despite the weak consumer environment and the possibility of further inventory reductions by distributors.

“The surprise was not at the sales line, it was really all gross margin,” D.A. Davidson & Co analyst Timothy Ramey said, adding the unexpected margin gain was likely due to lower glass or corn costs, or cost cutting. He has a “neutral” rating on the stock.

Net profit fell 19 percent to $79.6 million, or 53 cents a share, in the fiscal fourth quarter that ended on April 30, from $98.7 million, or 65 cents a share, a year earlier.

Analysts polled by Reuters Estimates had expected a profit of 49 cents.

Sales fell 12 percent to $683.3 million as distributors worldwide took on less inventory and the stronger U.S. dollar reduced the value of overseas sales. Analysts had expected $677.9 million.

The Louisville, Kentucky-based company, which previously said it expected the U.S. spirits market to grow at slower rates than in the past, expects 2010 earnings of $2.60 to $3.00 a share. Analysts were expecting $2.86 a share.

“While we expect foreign exchange to negatively affect reported earnings and recognize the possibility that further inventory reductions may occur, we are targeting modest growth in underlying operating income,” Chief Executive Paul Varga said in a statement.

The forecast, which analysts called very cautious, includes an estimated hit of 12 cents due to foreign exchange rates.

“It’s guidance you could drive a truck through,” Tim Ghriskey, chief investment officer with Solaris Asset Management in New York, said of the wide range the company provided. Ghriskey does not own the stock, but follows the sector closely.

Brown-Forman’s other brands include Casa Herradura tequila, Finlandia Vodka and Sonoma-Cutrer wine.

It said in April it planned to cut 250 jobs, or about 6 percent of its work force, as well as offer early retirement to certain employees, eliminate merit pay increases and cut back on discretionary spending, such as travel and meetings.

Brown-Forman shares rose $1.50, or 3.31 percent, to $46.77 in early New York Stock Exchange trading. (Reporting by Ben Klayman, editing by Maureen Bavdek)

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