The Zacks Analyst Blog Highlights: GileadSciences, Brown-Forman, Beam,
Constellation Brands and Diageo
CHICAGO, Dec. 12, 2012
CHICAGO, Dec. 12, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Gilead Sciences Inc.
(Nasdaq:GILD), Brown-Forman Corporation (NYSE:BF.B), Beam Inc. (NYSE:BEAM),
Constellation Brands Inc. (NYSE:STZ) and Diageo plc (NYSE:DEO).
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Here are highlights from Tuesday's Analyst Blog:
Gilead Plans 2-for-1 Stock Split
The board of directors at Gilead Sciences Inc. (Nasdaq:GILD) authorized a
two-for-one stock split. The action, which will take shape through a stock
dividend for stockholders as on record on January 7, 2013, is aimed at
increasing the number of authorized shares at Gilead to about 1.52 billion
from 759.3 million (as of November 30). The stock dividend is expected to be
distributed to the relevant stockholders on or about January 25, 2013.
Following the stock split, every shareholder at Gilead (on record on January
7, 2013) will get an additional share for each share he/she currently holds.
Gilead intends to commence trading at the NASDAQ at the post-split price from
January 28, 2013. Gilead in its press release further stated that purchasers
of its shares between January 7 and January 28, 2013 will get a due-bill. The
due bill will make the buyer eligible for an additional share for each share
We note that shares of Gilead Sciences have been on an uptrend since the
beginning of the year driven by multiple positive catalysts, including the
purchase of Pharmasset, targeting the lucrative hepatitis C virus (HCV) market
and the approval of the high potential HIV therapy, Stribild. The stock is
currently hovering around its 52-week high of $76.28, reached on November 23,
2012. We believe that the soaring stock price necessitated the 2-for-1 stock
Apart from the positive developments noted above, Gilead received further good
news last month when it presented encouraging top-line data on its HCV
candidate sofosbuvir from a phase III study. Sofosbuvir (formerly GS-7977) was
added to Gilead's pipeline through its acquisition of Pharmasset in January
Brown-Forman to Issue Notes
Recently, Brown-Forman Corporation (NYSE:BF.B) – one of the leading producers
and distributors of premium alcoholic beverages in the world – announced that
it has completed the pricing of $750 million senior unsecured notes offering.
Further, it is anticipated that the debt offering will be completed on
December 12, 2012.
According to the company, the notes will be offered in three different
tranches having distinct maturity dates. The first $250 million notes,
carrying an annual interest rate of 1.00%, will mature on January 15, 2018.
Another $250 million worth of senior notes, which will be issued at an
annualized interest rate of 2.25%, are due on January 15, 2023. The last $250
million of notes will carry an annual interest rate of 3.75% and maturity date
of January 15, 2043.
A consortium of Barclays Capital Inc., Citigroup Global Markets Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, U.S. Bancorp Investments, Inc.,
Deutsche Bank Securities, Inc. and Wells Fargo Securities, LLC are the
Underwriters of this issuance.
Management at Brown-Forman stated that the proceeds from the offering along
with $100 million of cash on hand will be utilized to pay the special cash
dividend of $4.00 per share, which comes to approximately $850 million. The
special cash dividend is separate from the company's regular quarterly
dividend. Earlier on Nov 15, 2012, Brown-Forman announced an increase of 9.3%
in its regular quarterly cash dividend to 25.5 cents per share, payable on Dec
The company has a consistent track-record of returning cash to its
shareholders in the form of share repurchase and dividend payment.
Brown-Forman has paid quarterly cash dividends consecutively for the past 65
years and has been increasing it for the last 29 years. The company's recent
dividend increase and special cash dividend reflects its commitment to enhance
long-term value for shareholders. Through this, Brown-Forman also represents
its ability to boost the long-term prospects for earnings as well as cash
As of Oct 31, 2012, the company has a cash and cash equivalents of $368.5
million, long-term debt of $501.4 million and shareholders' equity of $2.305
billion. The current debt-to-capitalization ratio comes to 17.9%. However,
after the completion of the debt offering, it will double to 35.2%. We believe
that debt-to-capitalization ratio, following the debt offering, will gradually
decline in the long run owing to the company's consistent track-record of
generating cash flows, which may be utilize to bring down debt.
We believe that Brown-Forman's strategy of expanding Jack Daniel's market
share in developed markets, such as France and the U.S., and emerging markets
including Russia, Poland and Mexico, where the whiskey category is in the
early stages of development, will enhance its top line.
However, apart from macroeconomic headwinds, distilled spirits are subject to
excise tax in various countries. Rising fiscal pressure in the U.S., European
and many emerging markets may lead to increasing risk of a potential excise
tax on spirits by the governments of respective countries. The effect of hike
in excise tax in the future may have an adverse effect on Brown-Forman's
Above all, the company faces intense competition from other well-established
players in the industry, such as Beam Inc. (NYSE:BEAM), Constellation Brands
Inc. (NYSE:STZ) and Diageo plc (NYSE:DEO). Moreover, Brown-Forman encounters
competition from local and regional players in the respective countries.
Consequently, this may dent the company's future operating performance.
Currently, Brown-Forman has a Zacks #3 Rank, which implies a short-term Hold
rating. Moreover, we maintain a long-term 'Neutral' recommendation on the
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