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Brown-Forman Lifts Earnings Outlook As Q2 Profit Beats View

Alcoholic beverage maker Brown-Forman Corp. (BF-B, BF-A) on Wednesday reported a 10 percent increase in profit for second quarter from last year, reflecting improved margins and lower costs that helped offset flat revenues.

Earnings per share for the quarter topped analysts' expectations, while revenues missed their estimates. Looking ahead, the company raised its earnings outlook for fiscal 2013.

Brown-Forman, one of the largest American-owned spirits and wine companies and among the top 10 largest global spirits companies, sells its more than 35 brands in more than 160 countries.

Its brands include whiskey's Old Forester, Jack Daniel's, and Canadian Mist as well as Finlandia Vodka, Southern Comfort Liqueur, Sonoma-Cutrer wines, Don Eduardo Tequilas, and Korbel California Champagnes.

Paul Varga, chief executive officer of Brown-Forman said, "Our brands continue to deliver strong and balanced underlying growth in an uncertain global environment. We are pleased with the balance in both geographic and portfolio mix, as well as the fact that our gross margin expansion has benefited from volume gains, higher prices and lower costs."

The Louisville, Kentucky-based company's underlying net sales for the quarter grew 6 percent, driven by continued expansion into the emerging markets.

Operating margin for the quarter expanded 160 basis points from the year-ago period to 25.9 percent, while gross margin rose 220 basis points to 51.7 percent.

Brown-Forman's net income for the second quarter was $173 million or $0.80 per share, higher than $157.6 million or $0.73 per share in the prior-year quarter.

On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.78 per share for the quarter. Analysts' estimates typically exclude special items.

The per share results were adjusted for the three-for-two stock split effected in August 2012.

Net sales for the quarter were flat with the year-ago period at $1.01 billion, and missed analysts' consensus estimate of $1.05 billion.

Net sales growth in the quarter was negatively impacted from the giveback associated with first quarter trade buy-ins in advance of price increases, as well as the impact from foreign exchange and the absence of Hopland-based wines business, which the company sold in April 2011.

Looking ahead to fiscal 2013, Brown-Forman raised its outlook for earnings to a range of $2.58 to $2.70 per share from the prior range of $2.40 to $2.67 per share. Analysts expect the company to earn $2.66 per share for the year.

The company affirmed its full-year outlook for high single-digit underlying sales growth, but increased its expectations for operating income growth to low double digits.

In Wednesday's regular session, BF-A is trading at $67.26, down $0.14 or 0.21 percent on a volume of 14,991 shares.

BF-B is trading at $70.55, up $1.81 or 2.63 percent on a volume of 4,630 shares.

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by RTT Staff Writer

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