Brown-Forman (BF.A, BF.B) delivered a solid fiscal Q1 despite a challenging spirits environment and difficult year-over-year comparisons, RBC Capital Markets said in a note Thursday.

The analysts said market sentiment leading into the print was cautious, driven by a challenging spirits environment, tough year-over-year comparisons lapping the previous Blackberry launch load-in, distributor transition inventory build, and ongoing merger and acquisition noise.

Strong gross margins were the main highlight, though they likely won't stay this high as higher-cost barreled whiskey is expected to pressure H2, the analysts added.

Performance across developed markets continues to lag, meaning a sustained consumer recovery is required to get more constructive, the analysts said, adding that management's increased confidence in the favorable end of the operating income range reflects cost actions delivering above plan.

Management expects full-year organic sales to be approximately flat and has increased confidence that organic operating income will land at the favorable end of its negative 3% to negative 5% range.

The investment firm cut its fiscal 2027 EPS estimate to $1.69 from $1.71. For fiscal 2028, it lowered its EPS estimate to $1.73 from $1.75.

RBC has a sector perform rating and a $27 price target on Brown-Forman.