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What's Hurting AB InBev (BUD) Stock Price After a Solid Q4?
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Anheuser-Busch InBev SA/NV (BUD - Free Report) , alias AB InBev, depicted great strength in fourth-quarter 2017, which was clear from the top- and bottom-line beat after dismal trends in the past. Though this turnaround was a welcome sign, the company’s commentary on soft results, anticipated in the first quarter of 2018, has kept investors’ enthusiasm at bay.
Consequently, shares of AB InBev lost 5.3% in the past three months, wider than the Beverages – Alcohol industry’s 1.7% decline. However, the industry is favorably ranked in the top 40% (105 out of 265) of the Zacks classified industries. Also, a VGM Score of A justifies this Zacks Rank #3 (Hold) stock’s growth prospects, despite a soft near-term view.
Near-Term Hurdle
Going forward, management sees volatility in certain key markets. However, the company’s focus on brand portfolio and strong commercial plans positions it well to deliver strong revenues and EBITA in 2018. Nevertheless, it envisions a soft first quarter, owing to difficult comparisons from prior-year, and phasing of marketing and sales initiatives.
This has led analysts to become bearish on the stock as evident from the downtrend in the Zacks Consensus Estimate. Estimate for the first quarter declined 9 cents to 85 cents per share in the last seven days. Additionally, estimates for 2018 and 2019 dipped 1 cent each to $5.05 per share and $5.77 per share, respectively, in the last seven days.
Further, consumers’ shifting preference toward booming craft spirits in the United States might take a toll on the growth of the company’s Budweiser brand.
AB InBev Still Holds Potential
As stated above, fourth-quarter 2017 was a strong quarter for AB InBev with earnings returning to a beat trend after seven consecutive negative surprises. Moreover, revenues surpassed estimates after two straight misses. Further, it delivered solid organic revenue growth, backed by ongoing revenue management and premiumization initiatives that bolstered the performance of its global brands, particularly outside their home markets. Consolidated revenues at its three global brands, Budweiser, Corona and Stella Artois, improved 17.8% in the reported quarter.
Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise
Going forward, the company anticipates strong top-line growth for full-year 2018, driven by solid brands performance and robust commercial plans.
Further, AB InBev remains focused on further solidifying the strong image and market position of its brands to enhance relations with consumers. It keeps looking for near beer alternatives, along with no- and low-alcohol beers, to provide greater choices to consumers. Consequently, management expects the low and no-alcohol beer category to account for about 20% of its global beer volumes by 2025.
Other than this, AB InBev’s foray into the craft beer space and its planned buyout of organic energy drinks and sparkling water and juice maker – Hiball, underscores its focus on exploiting all opportunities to drive top-line growth.
The craft beer space is an attraction for growth-seeking brewers, with market shares having doubled from 2000 to 2005, per the Brewers Association. This was backed by the rising consumer preference for the beer category. The company’s robust craft beer portfolio includes well-known names like Karbach, Devils Backbone, Four Peaks, Breckenridge, Goose Island and Golden Road among others. Given the solid industry prospects and increasing consumer demand, we believe that AB InBev is likely to benefit from its strategy of exploring the craft beer space.
In all, these factors have collectively helped this Belgium-based retailer to carve an impressive niche, thus, emerging as the strongest player in the beer space.
Campari Group has long-term earnings growth rate of 7.5%. Moreover, the stock surged 39.6% in the past year.
Heineken, with long-term earnings growth rate of 8.4%, returned 29% in the past year.
Pernod Ricard has long-term EPS growth rate of 7.5%. Further, the stock improved 43.7% in the past year.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Image: Bigstock
What's Hurting AB InBev (BUD) Stock Price After a Solid Q4?
Anheuser-Busch InBev SA/NV (BUD - Free Report) , alias AB InBev, depicted great strength in fourth-quarter 2017, which was clear from the top- and bottom-line beat after dismal trends in the past. Though this turnaround was a welcome sign, the company’s commentary on soft results, anticipated in the first quarter of 2018, has kept investors’ enthusiasm at bay.
Consequently, shares of AB InBev lost 5.3% in the past three months, wider than the Beverages – Alcohol industry’s 1.7% decline. However, the industry is favorably ranked in the top 40% (105 out of 265) of the Zacks classified industries. Also, a VGM Score of A justifies this Zacks Rank #3 (Hold) stock’s growth prospects, despite a soft near-term view.
Near-Term Hurdle
Going forward, management sees volatility in certain key markets. However, the company’s focus on brand portfolio and strong commercial plans positions it well to deliver strong revenues and EBITA in 2018. Nevertheless, it envisions a soft first quarter, owing to difficult comparisons from prior-year, and phasing of marketing and sales initiatives.
This has led analysts to become bearish on the stock as evident from the downtrend in the Zacks Consensus Estimate. Estimate for the first quarter declined 9 cents to 85 cents per share in the last seven days. Additionally, estimates for 2018 and 2019 dipped 1 cent each to $5.05 per share and $5.77 per share, respectively, in the last seven days.
Further, consumers’ shifting preference toward booming craft spirits in the United States might take a toll on the growth of the company’s Budweiser brand.
AB InBev Still Holds Potential
As stated above, fourth-quarter 2017 was a strong quarter for AB InBev with earnings returning to a beat trend after seven consecutive negative surprises. Moreover, revenues surpassed estimates after two straight misses. Further, it delivered solid organic revenue growth, backed by ongoing revenue management and premiumization initiatives that bolstered the performance of its global brands, particularly outside their home markets. Consolidated revenues at its three global brands, Budweiser, Corona and Stella Artois, improved 17.8% in the reported quarter.
Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise
Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise | Anheuser-Busch InBev SA/NV Quote
Going forward, the company anticipates strong top-line growth for full-year 2018, driven by solid brands performance and robust commercial plans.
Further, AB InBev remains focused on further solidifying the strong image and market position of its brands to enhance relations with consumers. It keeps looking for near beer alternatives, along with no- and low-alcohol beers, to provide greater choices to consumers. Consequently, management expects the low and no-alcohol beer category to account for about 20% of its global beer volumes by 2025.
Other than this, AB InBev’s foray into the craft beer space and its planned buyout of organic energy drinks and sparkling water and juice maker – Hiball, underscores its focus on exploiting all opportunities to drive top-line growth.
The craft beer space is an attraction for growth-seeking brewers, with market shares having doubled from 2000 to 2005, per the Brewers Association. This was backed by the rising consumer preference for the beer category. The company’s robust craft beer portfolio includes well-known names like Karbach, Devils Backbone, Four Peaks, Breckenridge, Goose Island and Golden Road among others. Given the solid industry prospects and increasing consumer demand, we believe that AB InBev is likely to benefit from its strategy of exploring the craft beer space.
In all, these factors have collectively helped this Belgium-based retailer to carve an impressive niche, thus, emerging as the strongest player in the beer space.
Three Hot Picks in the Beverages - Alcohol Space
Some better-ranked stocks in the broader Consumer Staples are Campari Group , Heineken NV (HEINY - Free Report) and Pernod Ricard SA , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Campari Group has long-term earnings growth rate of 7.5%. Moreover, the stock surged 39.6% in the past year.
Heineken, with long-term earnings growth rate of 8.4%, returned 29% in the past year.
Pernod Ricard has long-term EPS growth rate of 7.5%. Further, the stock improved 43.7% in the past year.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>