EPS of $0.36 decreased by 12.2% from previous year
Gross margin of 59.7%
Net income of 170.00M
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BrownForman Corporation (0HQ3.L) QQ1 2026 Results — Resilient Earnings from Premium Beverages with Robust Free Cash Flow
Executive Summary
Brown-Forman reported QQ1 2026 revenue of USD 924.0 million, down 2.84% year over year but up 3.36% quarter over quarter, reflecting a modest top-line pullback versus the prior-year period with some quarterly seasonality. Gross margin stood at 59.74% and operating margin at 28.14%, underscoring the durability of pricing power and a highly cash-generative business model in the premium beverages segment. Net income reached USD 170.0 million, translating to a net margin of 18.40% and earnings per share (EPS) of USD 0.36, with YoY declines primarily a function of base effects and mix rather than deteriorating core profitability.
The company generated USD 160.0 million in cash from operations and USD 129.0 million of free cash flow in the quarter, enabling USD 107.0 million in dividends paid and contributing to a net debt position of roughly USD 2.23 billion. Brown-Forman maintains a strong liquidity profile (cash and cash equivalents of USD 471.0 million, current ratio 2.79) and a disciplined capital structure (total debt USD 2.701 billion; debt-to-capitalization about 40.4%). The dividend payout remains sizable at 62.9% of earnings, supported by solid cash generation and ongoing brand strength in a premium, consumer-defensive category.
Looking ahead, management commentary (where available in the provided data) and the QoQ acceleration in profitability suggest continued operating leverage and mix benefits from core portfolios. The absence of explicit full-year guidance in the input data means readers should anchor expectations to medium-term fundamentals: stable gross margins, disciplined SG&A, and continued free cash flow generation that sustains the dividend and supports selective deleveraging or strategic investments as conditions allow.
Liquidity and Cash Flow
- Net Cash Provided by Operating Activities: USD 160.0m; Free Cash Flow: USD 129.0m
- Cash at End of Period: USD 490.0m; Cash & Equivalents: USD 471.0m
- Dividends Paid: USD 107.0m; Net Cash Used Provided by Financing Activities: USD -138.0m
- Net Change in Cash: USD 27.0m; CFO per Share: USD 0.34; FCF per Share: USD 0.273
Balance Sheet Health
- Total Assets: USD 8.171b; Total Liabilities: USD 4.183b; Total Equity: USD 3.988b
- Total Debt: USD 2.701b; Net Debt: USD 2.230b
- Working Capital Strength: Current Ratio 2.79; Quick Ratio 1.06; Cash Ratio 0.32
- Leverage: Debt to Total Capitalization 40.4%; Debt to Equity 0.677; Interest Coverage ~10.4x
Invested Capital and Valuation
- Payout Ratio: 62.9%; Dividend Yield: ~0.79%; Price-to-Book ~3.42x; P/E ~20.1x; EV/EBITDA ~59.4x
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
924.00M
-2.84%
3.36%
Gross Profit
552.00M
-2.30%
7.60%
Operating Income
260.00M
-7.47%
26.83%
Net Income
170.00M
-12.82%
16.44%
EPS
0.36
-12.20%
16.54%
Key Financial Ratios
currentRatio
2.79
grossProfitMargin
59.7%
operatingProfitMargin
28.1%
netProfitMargin
18.4%
returnOnAssets
2.08%
returnOnEquity
4.26%
debtEquityRatio
0.68
operatingCashFlowPerShare
$0.34
freeCashFlowPerShare
$0.27
dividendPayoutRatio
62.9%
priceToBookRatio
3.42
priceEarningsRatio
20.06
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data provided in the input. No management quotes available from the supplied materials.
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Forward Guidance
No formal full-year guidance was included in the provided data. Given the QQ1 2026 performance, investors should monitor: (1) gross margin trajectory and input cost inflation or relief, (2) SG&A discipline and any scale benefits from brand investments, (3) cash flow conversion and working capital dynamics, (4) leverage trajectory and potential debt reduction versus opportunistic share repurchases or continued dividend growth. The company’s strong FCF generation supports a durable dividend and opportunistic capital allocation, but macro headwinds (FX, commodity costs, regulatory changes) could influence margin expansion and earnings visibility.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0HQ3.L Focus
59.74%
28.10%
4.26%
20.06%
0R2B.L
61.40%
22.50%
1.88%
38.06%
0QZ5.L
33.60%
16.70%
4.45%
14.25%
0HR2.L
83.40%
67.50%
3.49%
25.00%
0R2M.L
80.50%
19.90%
2.75%
20.65%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Brown-Forman presents a defensively positioned investment within Consumer Defensive equities, anchored by a high-margin, cash-generative premium-beverages portfolio. The QQ1 2026 results show resilience in profitability metrics and solid FCF, supporting an industry-standard dividend policy. Relative to the peer group, Brown-Forman trades at a mid-to-high premium on EV/EBITDA (about 59.4x) with a stable P/E around 20x and a dividend yield of ~0.8%, reflecting quality and brand potency. The primary catalysts are continued margin stability and prudent capital allocation (dividends and selective investments) against a backdrop of potential volume disruption and commodity/currency volatility. Investors should monitor margins, debt trajectory, and the pace of international expansion as key drivers of longer-term value creation. Short-term risk centers on base effects in revenue and potential headwinds from macro and FX factors; long-term upside hinges on brand strength, price/mix optimization, and the effective deployment of free cash flow toward deleveraging and growth initiatives.
Key Investment Factors
Growth Potential
Premium-brand strength (Jack Daniel’s ecosystem) supports pricing power and resilient demand; international expansion and brand diversification offer upside to revenue stability and mix benefits; potential to grow e-commerce and on-premise channels in select markets.
Profitability Risk
High reliance on a limited set of premium brands exposes earnings to brand/channel disruption; macroeconomic sensitivity in discretionary segments; commodity cost volatility and currency effects; regulatory risk in distilled spirits and advertising across geographies; substantial net debt limits aggressive financial flexibility.
Financial Position
Strong cash generation and an active dividend policy underpin financial resilience; liquidity metrics are solid, though leverage remains meaningful. The balance sheet supports ongoing capital returns but leaves limited cushion for aggressive deleveraging without affecting shareholder distributions.
SWOT Analysis
Strengths
Robust gross margin (59.74%) and stable profitability in a premium beverages portfolio.
BrownForman Corporation (0HQ3.L) QQ1 2025 Results — Premium Brands, Elevated Working Capital, and Debt Leverage in a Defensively Positioned Beverage...