BUD 032612
Anheuser-Busch InBev (BUD)
After pounding a couple pints of your favorite beer, the stresses of modern day society may seem just a little bit less severe. Based on Anheuser-Busch InBev’s most recent earnings report and outlook, it seems that the world might be doing just that. It’s also the choice of much of the middle class and beer is, after all, the original social network. (That’s what Anheuser-Busch InBev claims anyway).
According to the Beer Institute, (yes there is such a thing) sales of the hoppy beverage rose more than 2% globally in 2011. Total sales for the year came in at $98 billion here in the US. Americans are the global kings of beer consumption compared to wine and hard liquor.
Nielsen research noted that the rise in sales revenue is coming largely in part by the high-end beer business. The sale of imports, crafts and above-premium beers sold “off-premises” was up nearly 3 percent.
It may be a good thing that “The King of Beers” joined forces with Inbev in 2008 because much of the growth is coming from “local” and “craft” specialty beers. Some of the major US brands (like Bud Light, Coors and Miller) are actually losing market share as consumers’ tastes change. Budweiser however has been gained some international love and so have shares of BUD.
Company Description & Earnings Developments
Anheuser-Busch InBev is the world’s largest beer brewer with operations in over 30 countries and sales in over 130 different nations. The company, which is headquartered in Sao Paulo Brazil sells the bulk of their products in North and South American. There is a very good chance that at least one of their concoctions has passed over your lips if you’re a beer drinker. Their major brands include Budweiser, Michelob, Stella Artois, Becks, Hoegarrden, Leffe, Bass and Brahma.
But some of their fastest growing brews are what they call their “local jewels”; dozens of local, hand crafted beers from all around the world, and there are dozens of them (over 200 to be exact). These, smaller, unique brands are helping BUD keep up with the influx of smaller breweries that are trying to capture the taste buds of beers drinkers all over.
In fact, standard domestic beer has been the weak spot in the sector, with experts noting a 50% sales drop between 2007 and 2010. Sales have been rebounding as the middle class picks up the pieces and gains confidence (and their jobs) back.
Ambev recently reported better than expected results for Q42011. Earnings per share came in at 56 cents, beating the Zacks Consensus Estimate by a penny. It was a 14% increase over the same quarter in 2010.
Financial Profile
BUD is a mega-cap (115.88 billion) company that is trading at about 16 times forward (expectations for next quarter) earnings.
BUD became a Zacks Rank 1 strong buy on March 26th. Thier profit increased from $10.89 billion FY2010 to $12.32 billion in FY2011on over $39 billion in revenue. They are expected to earn $4.52 per share in FY2012 according to the Zacks Consensus Estimate.
Moving Forward
Anheuser-Busch InBev has averaged a 7.70% positive earnings surprise over the past 4 quarters.
Of the 9 analysts who cover BUD, the consensus is for the company to grow earnings by 12% in the current year (FY2012) and roughly 11% in FY2013.
In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago for the current quarter as well as FY2012 and FY2013. There were a couple revisions to next quarter’s expectations, which currently stand at $1.07 per share.
In their annual report, the CEO that “the global economy [in 2012] will be little changed from the challenging conditions of the past year. In this environment, we will continue to focus on what we can control, striving to grow our revenues ahead of the product of industry growth and inflation, to drive higher profitability and cash generation, while strengthening the financial foundation of the business through further reductions in leverage.”
The quarter Zacks Consensus Estimate is for $0.90 per share, which would represent growth of about 22.6% year over year; BUD reports on May 9th.
Market Performance & Technicals
BUD has been making a steady stream of higher highs and higher lows since the lows of October of 2011. For the majority of the move the stock has stayed above its 50 day moving average, which now stands at $66.15. BUD also broke out above the 200 day moving average and hasn’t looked back since.
The technical buy signal came when the 50 crossed above the 200 in mid December, pushing the stock up 47%.
Look for a small amount of initial support at the $72 level, but nothing substantial below that until $68.50 or so. From there, look to the 50 and 200 day moving averages. To the upside, BUD is in uncharted territory, blasting into all time highs since the merger.
BUD has exceeded the S&P 500’s performance in the past year by 18%; outpacing it by roughly 6.5% in the past 3 months. The stock remains in a bullish trend and has maintained its momentum in the past month, leading the index by about 6.5% as well. Watch for a near term overbought situation, but there is no doubt that momentum is on the side of the biggest beer brewing in the world.
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.
