Brown-Forman Corporation (NYSE:BF-B) was among the stocks Jim Cramer highlighted, along with his latest game plan as the oil-shock-driven sell-off continues. Cramer highlighted the stock’s decline over the past five and a half years, as he said:
No one’s saying that things are going great for Brown-Forman, and I don’t want to give you that impression. They’re not. But given the context of a stock with a great brand, Jack Daniel’s down nearly 70% over the past five and a half years, we have to grade this one on a curve. More importantly, there are genuine signs of some improvement… It’s not like Brown-Forman has its head in the sand… After eight consecutive quarters’ year-over-year declines, Brown-Forman reported positive net sales growth in its most recent quarter along with a healthy earnings beat… So after years in the house of pain, the business is finally seeing some improvement. Meanwhile, the stock’s gotten pretty darn cheap as long as you can trust management to make the numbers. It now sells for less than 16 times this year’s earnings estimate…
It’s down from 40 times earnings at its high in 2020. And now there’s this new catalyst, the takeover interest from Pernod Ricard. Now, I should say up front that there are reasons to be skeptical about the potential for a deal like this… I hope they’re willing to sell because frankly, I think this proposed merger makes a ton of sense. It would create a combined business that’s more diverse and better positioned to take on the market leader that is Diageo, which right now feels like kind of a pitiful, helpless giant. There could be lots of cost synergies, too.
But here’s the bottom line in this very exciting story: The news of a potential merger between Pernod Ricard and Brown-Forman has me wondering if some of these liquor companies might actually be worth something. A stock like Brown-Forman has come down huge from its highs, and the underlying business has finally started beating the numbers again. They’re even posting sales and earnings growth for the first time in ages. So while this horrible market has you thinking about buying a bottle of Jack Daniel’s in your liquor store… perhaps you should be picking up some shares of the company that made the bottle. For the first time… I think that Brown-Forman could be worth [buy, buy, buy].
Brown-Forman Corporation (NYSE:BF-B) produces and sells a diverse range of spirits and wines, including well-known brands like Jack Daniel’s and Woodford Reserve.
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