'I am all for growth businesses but with extra oomph being given by the Jim Beam takeout the share does not excite me at the moment...especially when I can buy broad peers like Remy Cointreau or Pernod Ricard at a discount (to neutral cycle earnings) and also with good brands'
Of course a high valuation can be indicative of success and looking through the recent Brown-Forman annual meeting presentation this was very apparent:
The shares have though come off their June high although in proportional terms it is pretty immaterial: that's still some performance over the last year.
So how about the numbers today? The comment which caught my attention was this one:
'The geopolitical environment remains fragile, particularly in Russia, where iconic American brands are experiencing increased scrutiny, including some of Brown-Forman's brands'
No surprises there. Headline Q1 numbers came out at 5-7% growth (good general emerging market and super premium growth but countering this some inventory absorption/tough comparisons in the US) but for the full year the company remains sanguine:
'We anticipate higher rates of sales growth over the balance of the year, led by Jack Daniel’s and our portfolio of premium whiskey brands. We reaffirm our full-year guidance and our expectations of 9-11% underlying operating income growth in fiscal 2015'
At a near x20 EV/ebit valuation Brown-Forman remains in the 'structural growth' camp. As noted above branded businesses have been taken out (Jim Beam) at eye-popping levels. Despite the company undertaking the buybacks (relatively modest) at an average price of just over US$90 the share is going to have to be sub US$80 before I have a look at it again.