NEW YORK (TheStreet) -- Shares of Brown-Forman (BF.B) -- the Jack Daniels maker scheduled to report its quarterly results on Wednesday -- aren't cheap, but avoiding the stock solely based on price may be a mistake.
The stock trades at 29 times earnings estimates for its fiscal year, compared with a price-to-earnings ratio of 21 for the Standard & Poor's 500 Index (SPY). One reason for the premium price is that Brown-Forman, which ships 14 million 9-liter cases of whiskey to more than 170 countries, has established a dominant leadership position in the industry. Like leading brands in other businesses and industries, the company enjoys a loyal following.
For the company's fiscal fourth quarter ended on April 30, analysts on average expect Brown-Forman to deliver 66 cents in earnings per share on revenue of $922 million, compared with earnings of 62 cents a share on $689 million in revenue a year earlier.
In Brown-Forman's fiscal third quarter, which ended on Jan. 30, Jack Daniels' sales rose 8%. Margins in the company's whiskey business expanded by 1.3 percentage points from a year earlier to almost 51% of revenue, and operating expenses declined 10 basis points to 25.2% of revenue. Combined, that led to an operating margin of 25%.
Besides Jack Daniels, the company produces such popular drinks as Finlandia, Southern Comfort and Canadian Mist. It also produces Sonoma-Cutrer wine and Korbel champagne.
Shares in the company, which was founded by George Garvin Brown in 1870, have risen 6.8% year to date, compared with a gain of 1.2% by the S&P 500.