Brown-Forman (NYSE: BF.B), the maker of alcohol products such as Jack Daniel's and Southern Comfort, is drunk on success today. The B shares of the company were up well over 8% at the time of this writing in afternoon trading, on good volume. The first-quarter earnings served as the catalyst.
Net sales unfortunately decreased 7%, but earnings per share on an adjusted basis (taking into account a charge in the year-ago period) expanded by 17% to 81 cents. According to Earnings.com, that number came in way ahead of estimates of 62 cents per share.
Brown-Forman succeeded in tightening up its operations and increasing the gross margin, as The Wall Street Journal (subscription required) pointed out earlier today. And although cash from operations only went up slightly, the amount took care of obligations related to capital spending and dividend payouts.
Well, if you were long Brown-Forman going into the report, obviously you know what to do: sell into strength. The trade is done. If you weren't long, I wouldn't buy today for sure, mostly because the price is in an elevated state.
I'll be honest: I'm a teetotaler myself, and don't necessarily look to producers of alcohol products for investment ideas. I go the non-alcohol route with The Coca-Cola Company (NYSE: KO), in fact. I mean, it would be hard for me to root for a company like this to increase its sales. And I'd argue that a beverage company like Coke has the better brand equity.
But looking at the stock, I suppose it could be a possible buy for those who do feel comfortable with investing in alcohol on a pullback and a higher dividend yield. It does own some popular products in its space, so it may do well over time.
As for me, I'll look to get drunk on investment success with some other vehicle.
Disclosure: I own Coke; positions can change without notice.
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