Brazil And Mexico Markets Will Fuel Global Premium Spirits Expansion

Key Takeaways

• Strategic premiumization, international market growth, and direct-to-consumer expansion enable revenue diversification and improved margins despite domestic uncertainty.
  
• Innovation in super-premium and craft spirits, coupled with enhanced digital marketing, positions Brown-Forman for sustained earnings and strong category momentum.
  
• Structural demand headwinds, changing consumer preferences, competitive pressures, and market uncertainty threaten revenue growth, margins, and Brown-Forman's long-term earnings potential.

Catalysts

Manufactures, distills, bottles, imports, exports, markets, and sells a variety of alcohol beverages.

• Brown-Forman is realizing strong organic net sales growth in emerging international markets (25%+ in some regions like Brazil and Mexico), driven by strategic focus on premiumization and distribution of flagship and super-premium brands, which positions the company to benefit as the global middle class expands-supporting future revenue and geographic diversification, which should help offset U.S. market uncertainty.
  
• The ongoing trend towards premium and craft spirits among younger, urban consumers is being addressed through innovation (e.g., launches like Jack Daniel's Tennessee Blackberry and focus on super premium whiskeys), which should lift average selling prices, gross margins, and drive long-term earnings growth.
  
• Expansion of e-commerce and direct-to-consumer channels, alongside new distributor partnerships (notably in the U.S.), is broadening Brown-Forman's brand accessibility and improving targeted marketing effectiveness, which is expected to boost sales volumes and strengthen EBIT margins over time.
  
• Investments in a streamlined workforce structure, digital marketing, and data analytics mean Brown-Forman can respond more rapidly to market shifts, maximize brand engagement, and improve operational efficiency-potentially enhancing net margins and future earnings.
  
• Ongoing global consumer trend from beer/wine to brown spirits and specialty liquors, combined with Brown-Forman's proven ability to globalize successful innovations (e.g., flavored whiskey variants), supports sustained category tailwinds for revenue growth and margin expansion, reinforcing resilience against structural industry headwinds.

Brown-Forman Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Brown-Forman's revenue will grow by 1.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 21.4% today to 21.1% in 3 years time.
• Analysts expect earnings to reach $873.0 million (and earnings per share of $1.92) by about September 2028, up from $844.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.0x on those 2028 earnings, up from 15.8x today. This future PE is lower than the current PE for the US Beverage industry at 25.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Brown-Forman Future Earnings Per Share Growth

Risks

• Persistent declines in key developed markets (U.S., U.K., Germany) driven by pressured consumer confidence, economic softness, and mid-single-digit declines in whiskey and total spirits consumption signal potentially deeper, longer-term structural demand headwinds, which may impair revenue growth and limit earnings expansion.
  
• Increasing consumer moderation trends, health and wellness concerns, and the rise of lower/no-alcohol alternatives-particularly among Gen Z and younger demographics-raise the risk of erosion in Brown-Forman's core customer base and could cap long-term revenue and volume growth.
  
• Intensifying competition from both large spirits players and proliferating local/craft brands, especially in the premium and super-premium whiskey/tequila segments, threatens Brown-Forman's pricing and volume, potentially compressing margins and slowing revenue growth.
  
• Continued exposure to negative effects from foreign exchange volatility, trade disputes (such as ongoing U.S.-Canada tariffs), and normalization of high-margin used barrel sales inject uncertainty into earnings and net margins, adding volatility to reported results.
  
• Slower than expected normalization or success in turning around developed markets, overdependence on established brands like Jack Daniel's, and potential failure to accelerate innovation or diversify into new, fast-growing categories could result in market share loss and muted long-term earnings growth.

Valuation

• The analysts have a consensus price target of $31.856 for Brown-Forman based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $42.0, and the most bearish reporting a price target of just $25.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.1 billion, earnings will come to $873.0 million, and it would be trading on a PE ratio of 21.0x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $28.2, the analyst price target of $31.86 is 11.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.