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Friday - UBS has raised the price target on Brown Forman (NYSE:BFb) (NYSE:BF-B) to $39.00, up from the previous $38.00, while maintaining a Neutral rating on the stock. UBS analyst Peter Grom explained that the adjustment follows Brown Forman’s third-quarter earnings, which surpassed expectations. The positive performance was attributed mainly to favorable non-recurring items, including a one-time gain of $0.14 from a sale.
Brown Forman reported their third-quarter results, which reflected a stronger performance than many had anticipated. The company reiterated its organic sales and operating profit outlook for the fiscal year 2025. This confirmation came as a surprise to some market participants, as the consensus leading up to the announcement had been less optimistic.
Upon the release of the quarterly results, Brown Forman’s stock saw a significant increase, trading up by 10%. This reaction was unexpected to some extent, given the bearish sentiment and positioning ahead of the earnings report. The substantial rise in share price on the day of the announcement signaled a shift in investor perception, albeit temporarily.
Grom noted that despite the stock’s notable movement, the quarterly report did not fundamentally alter the investment thesis for Brown Forman. The company still faces challenges, such as slow growth in the United States and developed international markets, as well as uncertainties related to tariffs. These factors contribute to difficulty in projecting the company’s revenue and profit trajectory with high confidence.
In terms of valuation, Brown Forman’s stock is considered attractive. It is trading at approximately 19 times earnings, which is below its five-year average of around 33 times. Additionally, the stock currently holds a 33% premium over the market, compared to its five-year average premium of about 40%. Despite these seemingly favorable valuation levels, the ongoing uncertainties and lack of clarity on when market conditions will normalize lead to a cautious outlook. As a result, many investors may adopt a wait-and-see approach before making further commitments to the stock.
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