BF-B Brown–Forman
Durable whiskey brands in a cyclical and secular slump; the price already assumes a recovery.
The story
Brown-Forman owns Jack Daniel's, Woodford Reserve, Old Forester and other premium spirits brands with real pricing power and aged-inventory barriers. It is a mature franchise in a cyclical and secular slump: post-pandemic destocking, tariff and trade friction, younger consumers drinking less, and GLP-1 headwinds have shrunk revenue about 2% a year. Margins have fallen from their 34% peak back toward the mid-20s. The brands are durable, but this is a mature firm working through a downturn, not a growth story.
Nothing material has changed since my 2026-09-28 take, so I am keeping every driver. TTM revenue of 3.92B is flat with the last fiscal year, and the 25.5% margin matches the trend I already assumed would recover to 28%, which is below the peak but in line with premium-spirits economics. Sales-to-capital stays at 0.8 rather than the trailing 0.6, because aged-whiskey inventory weighs on capital efficiency now but incremental growth should need less capital once destocking ends.
Value drivers
| Revenue growth (Y1) | -1.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 8y |
| Target operating margin | 28.0% |
| Years to target margin | 5 |
| Sales-to-capital | 0.80 |
| Beta | 0.75 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 8.2% |
| Terminal WACC | 9.1% |
Valuation bridge
| PV of explicit FCFF | 4.72B |
| PV of terminal value | 6.22B |
| Equity value | 8.66B |
| ÷ shares → per share | $18.87 |
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 3.88B | -1.0% | 26.0% | 813.30M | 0 | 813.30M | 751.93M |
| 2 | 3.86B | -0.5% | 26.5% | 825.02M | 0 | 825.02M | 705.22M |
| 3 | 3.86B | 0.0% | 27.0% | 840.81M | 0 | 840.81M | 664.49M |
| 4 | 3.88B | 0.5% | 27.5% | 860.88M | 24.10M | 836.78M | 611.40M |
| 5 | 3.91B | 1.0% | 28.0% | 885.52M | 48.45M | 837.07M | 565.47M |
| 6 | 3.97B | 1.5% | 28.0% | 898.80M | 73.40M | 825.41M | 515.51M |
| 7 | 4.05B | 2.0% | 28.0% | 916.78M | 99.33M | 817.45M | 472.02M |
| 8 | 4.15B | 2.5% | 28.0% | 939.70M | 126.65M | 813.05M | 434.06M |
Key risks
- Prolonged secular decline in spirits consumption (moderation, GLP-1, cannabis) keeps revenue shrinking
- Tariff escalation on American whiskey in the EU, Canada and elsewhere hits international growth and margins
- Margin recovery stalls as promotional intensity and input and agave costs persist
Catalysts
- Distributor destocking ends and depletions stabilize, putting revenue growth back to low single digits
- Trade deals remove retaliatory tariffs on American whiskey