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AB InBev (BUD) Q3 Earning in Line With Estimates, Revenue Miss
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Anheuser-Busch InBev SA/NV (BUD - Free Report) , alias AB InBev, reported mixed results in third-quarter 2023. The company’s earnings were in line with the Zacks Consensus Estimate, while revenues missed. Sales and earnings improved on a year-over-year basis.
Top and bottom-line growth reflected positive business momentum, owing to relentless execution, investment in its brands and accelerated digital transformation. Results also benefited from continued consumer demand for its brand portfolio. Backed by the ongoing business momentum, the company retained its view for 2023.
Shares of the Zacks Rank #3 (Hold) company have gained 5.7% in the past year against the industry’s decline of 9.2%.
Image Source: Zacks Investment Research
Q3 Highlights
AB InBev reported an underlying EPS (normalized EPS, excluding mark-to-market gains and losses related to the hedging of share-based payment programs, and the impacts of hyperinflation) of 86 cents in third-quarter 2023, up 2.4% from the 84 cents earned in the year-ago quarter. The bottom line was in line with the Zacks Consensus Estimate.
Revenues of $15,574 million improved 3.2% from the year-ago quarter. However, revenues missed the Zacks Consensus Estimate of $15,762 million. The company registered organic revenue growth of 9%, primarily driven by robust revenue per hectoliter (hl) growth and improvement across 80% of its markets. Revenues benefited from pricing actions, continued premiumization and other revenue-management initiatives. Accelerated digital transformation also contributed to top-line growth in the quarter.
Revenues reflected strong performances of its global brands — Budweiser, Corona, Stella Artois, Corona and Michelob Ultra — which collectively advanced 15.1% outside their home markets in the third quarter.
Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise
Revenue per hl was up 9% year over year on an organic basis, backed by revenue-management initiatives, the expansion of the beer category across the company’s key markets and premiumization efforts. However, the company’s total organic volume declined 3.4%, driven by a dip in the United States and a soft industry in Europe, partly negated by growth in the Middle Americas, Africa and APAC markets. The total organic volume included a 4% decline in the own-beer volume, offset by 1.4% growth in the non-beer volume.
AB InBev has been keen on making the most of investments in its portfolio over the years, as well as rapidly growing its digital platform, including BEES and Zé Delivery. The company’s digital transformation initiatives have been on track, with the B2B digital platforms contributing about 66% to its revenues in the third quarter. The company noted that the monthly active user base of BEES reached 3.4 million users as of Sep 30, 2023. Its omni-channel direct-to-consumer ecosystem of digital and physical products generated more than $390 million in revenues in third-quarter 2023.
The company has been focused on expanding its Beyond Beer portfolio, which has also been aiding the top line. Notably, the Beyond Beer portfolio contributed $385 million to the total revenues in third-quarter 2023.
The cost of sales increased 4.7% on a reported basis and 6% on an organic basis to $7,180 million in the third quarter. SG&A expenses rose 5.4% year over year to $4,583 million and 6% on an organic basis.
Our model had predicted the cost of sales to increase 5.9% for the third quarter, with a 20 basis points (bps) decline in the cost-of-sales rate to 45.3%. The SG&A expense rate was anticipated to increase 60 bps to 29.4%. In dollar terms, SG&A expenses were expected to increase 8.5% year over year in the third quarter.
The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $5,431 million, which improved 2.2% year over year on a reported basis and 4.1% on an organic basis. The normalized EBITDA margin contracted 30 basis points (bps) on a reported basis and 29 bps organically to 34.9%. The decline in organic EBITDA can be attributed to the ongoing commodity cost headwinds. This was materially offset by disciplined overhead cost management and efficient resource allocation that resulted in increased sales and marketing investments.
We anticipated the normalized EBITDA to increase 5.4% year over year to $5.6 billion. Meanwhile, the normalized EBITDA margin was expected to contract 20 bps to 35% in the third quarter.
Outlook
For 2023, AB InBev expects year-over-year EBITDA growth of 4-8%, in line with its medium-term outlook. It anticipates revenue growth to be higher than EBITDA growth, driven by strong volume and pricing.
The company expects net pension interest expenses and accretion expenses of $200-$230 million, based on currency and interest rate fluctuations. It anticipates an average gross debt coupon of 4% for 2023.
Management expects a normalized effective tax rate of 27-29% for 2023. Net capital expenditure is projected to be $4.5-$5 billion for 2023, driven by higher investments in innovation and other consumer-centric initiatives to fuel the ongoing momentum.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Dutch Bros (BROS - Free Report) , Constellation Brands (STZ - Free Report) and PepsiCo (PEP - Free Report) .
Dutch Bros currently sports a Zacks Rank #1 (Strong Buy). BROS has a trailing four-quarter earnings surprise of 44.6%, on average. The company has declined 29.8% in the past year.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales suggests growth of 29.5% year over year. The consensus mark for BROS’ earnings per share has moved down by a penny in the past seven days. The estimate for earnings per share indicates a decline of 22.2%.
Constellation Brands currently has a Zacks Rank #2 (Buy). STZ has a trailing four-quarter earnings surprise of 4.3%, on average.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales and earnings suggests growth of 5.3% and 7.8%, respectively, from the year-ago reported numbers. The consensus mark for STZ’s earnings per share has moved down 2.9% in the past 30 days. Shares of STZ have declined 3.9% in the past year.
PepsiCo currently carries a Zacks Rank #2. PEP has a trailing four-quarter earnings surprise of 5.6%, on average. The company has declined 10.2% in the past year.
The Zacks Consensus Estimate for PepsiCo’s current financial year’s sales and earnings suggests growth of 0.8% and 2.4%, respectively, from the year-ago reported number. The consensus mark for PEP’s earnings per share has moved up by a penny in the past 30 days.
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AB InBev (BUD) Q3 Earning in Line With Estimates, Revenue Miss
Anheuser-Busch InBev SA/NV (BUD - Free Report) , alias AB InBev, reported mixed results in third-quarter 2023. The company’s earnings were in line with the Zacks Consensus Estimate, while revenues missed. Sales and earnings improved on a year-over-year basis.
Top and bottom-line growth reflected positive business momentum, owing to relentless execution, investment in its brands and accelerated digital transformation. Results also benefited from continued consumer demand for its brand portfolio. Backed by the ongoing business momentum, the company retained its view for 2023.
Shares of the Zacks Rank #3 (Hold) company have gained 5.7% in the past year against the industry’s decline of 9.2%.
Image Source: Zacks Investment Research
Q3 Highlights
AB InBev reported an underlying EPS (normalized EPS, excluding mark-to-market gains and losses related to the hedging of share-based payment programs, and the impacts of hyperinflation) of 86 cents in third-quarter 2023, up 2.4% from the 84 cents earned in the year-ago quarter. The bottom line was in line with the Zacks Consensus Estimate.
Revenues of $15,574 million improved 3.2% from the year-ago quarter. However, revenues missed the Zacks Consensus Estimate of $15,762 million. The company registered organic revenue growth of 9%, primarily driven by robust revenue per hectoliter (hl) growth and improvement across 80% of its markets. Revenues benefited from pricing actions, continued premiumization and other revenue-management initiatives. Accelerated digital transformation also contributed to top-line growth in the quarter.
Revenues reflected strong performances of its global brands — Budweiser, Corona, Stella Artois, Corona and Michelob Ultra — which collectively advanced 15.1% outside their home markets in the third quarter.
Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise
Anheuser-Busch InBev SA/NV price-consensus-eps-surprise-chart | Anheuser-Busch InBev SA/NV Quote
Revenue per hl was up 9% year over year on an organic basis, backed by revenue-management initiatives, the expansion of the beer category across the company’s key markets and premiumization efforts. However, the company’s total organic volume declined 3.4%, driven by a dip in the United States and a soft industry in Europe, partly negated by growth in the Middle Americas, Africa and APAC markets. The total organic volume included a 4% decline in the own-beer volume, offset by 1.4% growth in the non-beer volume.
AB InBev has been keen on making the most of investments in its portfolio over the years, as well as rapidly growing its digital platform, including BEES and Zé Delivery. The company’s digital transformation initiatives have been on track, with the B2B digital platforms contributing about 66% to its revenues in the third quarter. The company noted that the monthly active user base of BEES reached 3.4 million users as of Sep 30, 2023. Its omni-channel direct-to-consumer ecosystem of digital and physical products generated more than $390 million in revenues in third-quarter 2023.
The company has been focused on expanding its Beyond Beer portfolio, which has also been aiding the top line. Notably, the Beyond Beer portfolio contributed $385 million to the total revenues in third-quarter 2023.
The cost of sales increased 4.7% on a reported basis and 6% on an organic basis to $7,180 million in the third quarter. SG&A expenses rose 5.4% year over year to $4,583 million and 6% on an organic basis.
Our model had predicted the cost of sales to increase 5.9% for the third quarter, with a 20 basis points (bps) decline in the cost-of-sales rate to 45.3%. The SG&A expense rate was anticipated to increase 60 bps to 29.4%. In dollar terms, SG&A expenses were expected to increase 8.5% year over year in the third quarter.
The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $5,431 million, which improved 2.2% year over year on a reported basis and 4.1% on an organic basis. The normalized EBITDA margin contracted 30 basis points (bps) on a reported basis and 29 bps organically to 34.9%. The decline in organic EBITDA can be attributed to the ongoing commodity cost headwinds. This was materially offset by disciplined overhead cost management and efficient resource allocation that resulted in increased sales and marketing investments.
We anticipated the normalized EBITDA to increase 5.4% year over year to $5.6 billion. Meanwhile, the normalized EBITDA margin was expected to contract 20 bps to 35% in the third quarter.
Outlook
For 2023, AB InBev expects year-over-year EBITDA growth of 4-8%, in line with its medium-term outlook. It anticipates revenue growth to be higher than EBITDA growth, driven by strong volume and pricing.
The company expects net pension interest expenses and accretion expenses of $200-$230 million, based on currency and interest rate fluctuations. It anticipates an average gross debt coupon of 4% for 2023.
Management expects a normalized effective tax rate of 27-29% for 2023. Net capital expenditure is projected to be $4.5-$5 billion for 2023, driven by higher investments in innovation and other consumer-centric initiatives to fuel the ongoing momentum.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Dutch Bros (BROS - Free Report) , Constellation Brands (STZ - Free Report) and PepsiCo (PEP - Free Report) .
Dutch Bros currently sports a Zacks Rank #1 (Strong Buy). BROS has a trailing four-quarter earnings surprise of 44.6%, on average. The company has declined 29.8% in the past year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales suggests growth of 29.5% year over year. The consensus mark for BROS’ earnings per share has moved down by a penny in the past seven days. The estimate for earnings per share indicates a decline of 22.2%.
Constellation Brands currently has a Zacks Rank #2 (Buy). STZ has a trailing four-quarter earnings surprise of 4.3%, on average.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales and earnings suggests growth of 5.3% and 7.8%, respectively, from the year-ago reported numbers. The consensus mark for STZ’s earnings per share has moved down 2.9% in the past 30 days. Shares of STZ have declined 3.9% in the past year.
PepsiCo currently carries a Zacks Rank #2. PEP has a trailing four-quarter earnings surprise of 5.6%, on average. The company has declined 10.2% in the past year.
The Zacks Consensus Estimate for PepsiCo’s current financial year’s sales and earnings suggests growth of 0.8% and 2.4%, respectively, from the year-ago reported number. The consensus mark for PEP’s earnings per share has moved up by a penny in the past 30 days.