Morningstar Rating

Stock Research and Analysis

by Thomas Mullarkey, CFA

Bulls Say

Compared with other spirits companies, Brown-Forman generates best-in-class returns on invested capital. Including goodwill, its ROICs tend to be in the high teens, 100-200 basis points higher than Diageo's.
Brown-Forman has ample opportunity to increase volume via international expansion, flavor extensions, and increasing demand for its ready-to-drink offerings.
The 2011 divestment of the Hopland wine business keeps management keenly focused on the highly profitable spirits business. Read more 

Bears Say

Although we don't expect any mishaps, brand concentration is a concern. Almost half of Brown-Forman's volume comes from Jack Daniel's products. Sustained weakness in this important brand would hurt the stock.
Alcohol is heavily taxed. Should governments drastically increase the excise tax on spirits, Brown-Forman's volume growth could fall short of expectations.
The Brown family maintains control of the company, holding approximately two thirds of the voting rights. Consequently, other shareholders are unable to exert influence over the company. Read more 

Management

Brown-Forman's managers have been exemplary stewards of shareholder capital. The company has been keenly focused on maximizing the potential of its Jack Daniel's family of brands and has made key divestments of noncore business lines in 2007 (consumer   Read more 

Profile

Based in Kentucky, Brown-Forman is a 142-year-old family-owned premium spirits manufacturer with a portfolio of more than 25 brands. In fiscal 2013, 38 million 9-liter cases   Read more 

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