CHICAGO, March 10, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Brown-Forman Corp. (NYSE: BF.B), Diageo plc (NYSE: DEO), Suntech Power Holdings Company Ltd. (NYSE: STP), LDK Solar Co. Ltd. (NYSE: LDK) and JinkoSolar Holding Company Ltd. (NYSE: JKS).
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Here are highlights from Wednesday's Analyst Blog:
Brown-Forman Tops on Int'l Sales
Brown-Forman Corp. (NYSE: BF.B), a leading global producer and distributor of premium alcoholic beverages, recorded fiscal 2011 third-quarter earnings of $140.7 million or 96 cents a share, compared with $107.9 million or 73 cents a share in the year-ago quarter. Quarterly results outpaced the Zacks Consensus Estimate of 86 cents a share.
Brown-Forman's net sales recorded a growth of 12.0% to $962.4 million from $861.7 million in the prior-year quarter. The growth was primarily attributable to solid performance in Australia, the U.K., Mexico, Turkey, Germany, France, and Brazil partly offset by weakness in the U.S. and Russia.
During the quarter, Brown-Forman's gross profit grew 13.0% year over year to $463.5 million, while gross margin increased 50 basis points (bps) year over year to 48.2%. Advertising expense inched up by 5.0% year over year to $92.0 million, primarily due to higher spending to support brands.
Selling, general and administrative expenses rose 8.0% year over year to $142.3 million, mainly due to charges related to changes to the company's route-to-market in Germany, Brazil, Canada, and Russia. Conversely, Brown-Forman's operating profit increased 30.0% year over year to $225.5 million, while operating margin expanded 320 bps to 23.4%.
Balance Sheet & Cash Flow
Brown-Forman ended the quarter with cash and cash equivalents of $278.6 million and long-term debt of $756.7 million.
Year to date, Brown-Forman generated $399.5 million of cash from operations and deployed $59.0 million toward debt repayment, $279.5 million for dividend payout, and $12.1 million on capital expenditures. The company repurchased up to $117 million of Class A and Class B shares as part of its authorization, which expired on December 1, 2010.
During the quarter, Brown-Forman paid a regular quarterly cash dividend of 32 cents a share on Class A and Class B common stock and an additional special cash dividend of $1.00 per share on Class A and Class B common stock.
On January 27, 2011, Brown-Forman's board of directors approved a regular quarterly cash dividend of 32 cents per share on Class A and Class B common stock, which will be paid on April 1, 2011, to stockholders of record as on March 9, 2011.
Fetzer Vineyards Sale
Brown-Forman has agreed to sell its Hopland, California based wine asset, Fetzer Vineyards, to Vina Concha y Toro S.A., a Chilean wine producer for $238.0 million.
The sale includes its bottling facility, Fetzer wine, Fetzer brand and other California-based wines but excludes its super-premium Sonoma-Cutrer brand. Under the financial advisory of Rabo Securities USA Inc. management expects to close the deal by April 2011.
The deal will help Brown-Forman to concentrate on its best growth prospects. The company intends to focus on markets offering better prospects and higher returns.
Guidance and Zacks Consensus
Moving forward, Brown-Forman anticipates moderate improvement in global economic conditions and customer trends in fiscal 2011. Accordingly, the company increased its earnings guidance to a range of $3.35 to $3.45 per share from $3.18 and $3.42 per share for fiscal 2011. The Zacks Consensus Estimate for the year is currently pegged at $3.31 per share.
The company faces intense competition from other well-established players in the industry, including Diageo plc (NYSE: DEO).
We maintain our Outperform recommendation on Brown-Forman. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no definite directional pressure on the shares over the near term.
Suntech Powered by High Profits
Suntech Power Holdings Company Ltd. (NYSE: STP) posted fourth quarter adjusted earnings of 32 cents per American Depositary Share (ADS), surpassing both the Zacks Consensus Estimate of 30 cents and year-ago adjusted earnings of 27 cents.
Fiscal 2010 adjusted earnings came in at 64 cents per share, exceeding the Zacks Consensus Estimate of 62 cents. Also, fiscal 2010 adjusted earnings per share surpassed fiscal 2009 adjusted earnings of 42 cents per share.
Suntech registered total net revenues of $945.1 million, an increase of 27.1% from $743.7 million in the third quarter of 2010 and an increase of 61.9% from $583.6 million in the fourth quarter of 2009. Total photovoltaic (PV) products shipment increased 19.8% over the third quarter of 2010 and 87.3% year over year.
Revenues in the reported quarter also comfortably beat the Zacks Consensus Estimate of $846 million. In the reported quarter, Suntech's gross profit was $153.4 million and gross margin was 16.2%. Overall, the company recorded a net income of $383.4 million versus $44.0 million in the year-ago period.
Fiscal 2010 revenue came in at $2.9 billion surpassing the Zacks Consensus Estimate of $2.7 billion and fiscal 2009 revenue of $1.7 billion. The year-over-year increase was primarily due to a 124.5% increase in shipments of PV products. This was partially offset by a decline in the average selling price of PV products.
Fiscal 2010 gross profit was $503.8 million and gross margin was 17.4% compared to consolidated gross profit of $338.8 million and gross margin of 20.0% for fiscal 2009. The decrease in gross margin was primarily a result of the reduction in the average selling price of PV products. Overall fiscal 2010 net income increased to $262.3 million versus net income of $85.6 million in fiscal 2009.
At fiscal 2010-end, Suntech reported cash and cash equivalents of $872.5 million, compared with $946.2 million as of September 30, 2010. During fiscal 2010, capital expenditures, which were primarily related to the construction of production facilities in Shanghai and other infrastructure projects to support expansion of capacity, totaled $335.6 million.
The company at the end of the reported quarter had outstanding long-term bank borrowings of $163.3 million and convertible notes worth $551.2 million.
Wuxi, China-based Suntech is a leading solar energy company. The company designs, develops, manufactures and markets photovoltaic (PV) cells and modules.
Looking forward in the first quarter of 2011, Suntech expects PV shipments to be relatively flat compared with the fourth quarter of 2010. Gross margin in the first quarter of 2011 is expected to be approximately 20%.
For fiscal 2011, Suntech expects to ship at least 2.2GW of solar products and generate revenues of $3.4 billion to $3.6 billion. Gross margin for fiscal 2011 is expected to be approximately 20% to 22%.
Suntech Power is one of the largest producers of PV solar modules under its proprietary Pluto technology with a geographically-diversified customer base. The company by the end of 2011 expects to achieve an annualized production capacity of 2.4GW for cell and module; and 1.2GW for wafer. Full year 2011 capital expenditure is expected to be in the range of $250 million–$270 million.
Other positive factors for Suntech include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China, and improving operating efficiencies. However apprehensions over rising competition, subsidy cuts in Europe, and financial stability of its customers overshadow the positives.
In the near term we believe the Zacks #1 Rank (Strong Buy) peers like LDK Solar Co. Ltd. (NYSE: LDK) and JinkoSolar Holding Company Ltd. (NYSE: JKS) are more promising compared to the Zacks #3 Rank (Hold) Suntech Power. In the longer run, our Outperform recommendation on the stock indicates that it should perform above the broader market.
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