Should I Do It? A Toast to Brown-Forman

Brown-Forman (BFB Quote), best known for producing Jack Daniel's, the world's top-selling brand of whiskey, has fallen out of favor with investors. The stock hit a fresh 52-week low Tuesday, closing at $66.06, or some 20% below its August highs.

The 136-year-old company also owns liquor brands like Southern Comfort and Finlandia vodka, in addition to Fetzer wine and Korbel champagne. The Hartmann luggage business also accounts for about 1.5% of Brown-Forman's total revenue and is reportedly up for sale.

The consensus analyst estimate is for the company to grow earnings 10% in fiscal 2007 to $3.15 a share, marking the fourth straight year of double-digit profit improvement. While some readers may not find it socially responsible to invest in an alcohol maker, the liquor industry is not generally leveraged to overall economic growth.

With that in mind, I'm here to answer readers' questions: Should I do it? Does Brown-Forman hold value at current levels or will the stock give investors a hangover?

The company posted fiscal second-quarter (ended October) results Nov. 30. Brown-Forman earned 92 cents a share, up 5% from the previous year, but 4 cents shy of analyst estimates. This shortfall came even though management produced 10% year-over-year revenue growth during the quarter, to $735 million.

The reason for the shortfall: The company reported soft overseas sales of its Jack Daniels brand, especially in the U.K., China and Spain. But despite fears of increased foreign competition, I believe that Brown-Forman will benefit from a weaker U.S. dollar. In fiscal 2006, 41% of the company's revenue was generated overseas.

To watch David Peltier's video take of this column, click here.