On Monday, Bernstein SocGen Group revised its price target for Brown Forman (NYSE:BFb) (NYSE:BF-B) shares, the producer of alcoholic beverages, reducing it to $66 from the previous $69, while maintaining an Outperform rating on the stock. The adjustment reflects a reevaluation of the company's financial prospects in light of current market conditions.
The firm observed that Brown Forman's inventories have been adjusted appropriately, and the company's underlying growth is moving in a positive direction. The current guidance provided by Brown Forman is also considered to be realistic.
Based on the next twelve months plus one (NTM+1) earnings, Brown Forman's stock is trading at a price-to-earnings (P/E) ratio of 20 times, which is notably the lowest since 2011. At that time, the company's portfolio was less premium and less internationally diverse than it is today.
The analyst from Bernstein SocGen Group highlighted that the valuation of Brown Forman's shares is "incredibly compelling," and the firm remains positive on the long-term investment case for the company.
However, the analyst noted that most investors are awaiting a positive catalyst, particularly an improvement in the U.S. underlying growth, which would lead to a re-rating of the stock.
Despite this positive outlook, the analyst acknowledged the difficulty in predicting the exact timing of when the U.S. market will return to mid-single-digit (MSD) growth.
This uncertainty seems to be a factor contributing to the revised price target, as investors look for clearer signs of growth before increasing their positions in Brown Forman's stock.
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