International Market Expansion Will Drive Premium Brand Momentum

Key Takeaways

• Expanding direct distribution and premium brand innovation are strengthening international growth, pricing power, and margins across key markets.
  
• Strategic cost efficiencies and disciplined capital allocation are supporting earnings stability and long-term growth amid short-term market challenges.
  
• Shifting consumer preferences, heightened global risks, and market competition threaten growth, margins, and earnings, while major strategic changes add further operational and profitability challenges.

Catalysts

Manufactures, distills, bottles, imports, exports, markets, and sells various alcoholic beverages.

• Brown-Forman is actively increasing its direct distribution in key developed and emerging international markets (such as Japan and Italy), enabling better control over pricing, brand positioning, and customer access-this should help accelerate future international revenue growth while improving overall margins.
  
• The company is capitalizing on premiumization and innovation through high-performing super-premium brands (e.g., Woodford Reserve, Diplomatico, and Herradura Cristalino), as well as new product launches (such as Jack Daniel's Tennessee Blackberry and expanding RTDs to the U.S.), supporting growth in average selling prices and potential net margin expansion.
  
• Brown-Forman is leveraging long-term growth in emerging markets (Brazil, Mexico, Türkiye) where rising middle classes are driving increased spirits consumption-this is expected to offset short-term developed market weakness and provide a sustainable engine for top-line revenue growth.
  
• Strategic cost initiatives, including streamlining the workforce and route-to-consumer optimization in the U.S., are expected to yield $70–$80 million in annualized savings, helping protect or grow operating margins and earnings despite the current weak sales environment.
  
• The company remains disciplined in capital allocation, increasing dividends and maintaining share buybacks, which-combined with future organic growth recovery-should support long-term EPS growth and further upside if cyclical category headwinds reverse.

Brown-Forman Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Brown-Forman's revenue will decrease by 0.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 21.9% today to 21.0% in 3 years time.
• Analysts expect earnings to reach $859.2 million (and earnings per share of $1.91) by about July 2028, down from $869.0 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 20.7x on those 2028 earnings, up from 16.5x today. This future PE is lower than the current PE for the US Beverage industry at 27.3x.
• 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 6.4%, as per the Simply Wall St company report.

Brown-Forman Future Earnings Per Share Growth

Risks

• Sustained declines in alcohol consumption, particularly among younger, more health-conscious demographics (Gen Z, healthy lifestyle trends, and rise of alternatives like cannabis and GLP-1 drugs), are creating ongoing structural pressure in key markets, which could limit long-term organic net sales growth.
  
• Increased geopolitical volatility, tariffs, and anti-American sentiment in several developed and emerging markets (notably Canada, Europe, and tariff-affected regions) are leading to net sales headwinds and impacting both top line revenue and gross margins.
  
• Brown-Forman's significant reliance on premiumization and super-premium brands exposes it to risk if premium spirits growth plateaus or reverses in response to prolonged macroeconomic uncertainty and a stretched consumer, resulting in margin compression and slower earnings growth.
  
• Competitive intensity, particularly from craft spirits, local brands, and value offerings, as well as increased competitive activity in important categories (like tequila and U.S. whiskey due to oversupply), threaten market share, pricing power, and future net margins.
  
• Disruption and volatility from major strategic transitions-including large-scale U.S. distributor changes, workforce restructuring, and brand divestitures-are expected to cause short-term organic net sales declines and operating income contraction, adding execution risk and potentially lowering near-term and medium-term earnings.

Valuation

• The analysts have a consensus price target of $31.284 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 $859.2 million, and it would be trading on a PE ratio of 20.7x, assuming you use a discount rate of 6.4%.
• Given the current share price of $30.34, the analyst price target of $31.28 is 3.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.