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AB InBev (BUD) Tops on Q2 Earnings & Sales, Simplifies Zones
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Anheuser-Busch InBev SA/NV (BUD - Free Report) , also known as AB InBev, reported better-than-expected earnings and revenues in second-quarter 2018, while sales dropped year over year. This marked the reversal of the company’s negative earnings surprise trend. Notably, the company has reported an earnings miss in eight of the nine preceding quarters. However, revenues surpassed estimates for the third straight quarter.
Overall, shares of AB InBev have gained 9.2% in the past month, outperforming the industry's increase of 4.5%.
Q2 Highlights
Normalized earnings per share of $1.10 rose 15.8% year over year from 95 cents in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $1.05. The company gained from improving trends in key markets and continued premiumization in the majority of its markets.
Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise
Revenues declined 1.2% to $14,014 million but surpassed the Zacks Consensus Estimate of $13,885 million. Moreover, the company registered organic revenue growth of 4.7%, courtesy of a 4.5% rise in revenues per hectoliter (hl) on a constant-geographic basis. The increase stemmed from ongoing revenue management initiatives along with strong performance of premium brands. Also, revenues per hl advanced 4% on a reported basis.
Consolidated revenues at the company’s three global brands — Budweiser, Corona and Stella Artois -- improved a substantial 10.1% globally and 16.7% outside home markets.
Total volumes advanced 0.8% with own-beer volumes rising 0.9% and non-beer volumes up 0.5%. Own-beer volumes gained from growth in Mexico and China, partly mitigated by softness in the United States and South Africa.
Cost of sales dropped 4.6% year over year to $5,196 million, while the same rose 4.7% organically. Further, organic cost of sales per hl grew 4.2%. On a constant-geographic basis, cost of sales per hl increased 5.5%. The increase was driven by higher currency rates and commodity prices as well as increased country mix, partly negated by synergy capture.
The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $5,568 million, up nearly 4% year over year and 7% on an organic basis. The increase was driven by solid top-line growth as well as gains from cost synergies, partly negated by higher sales and marketing investments for the FIFA World Cup in Russia. EBITDA margin expanded 190 basis points (bps) to 39.7% while the same increased 85 bps organically.
Organizational Changes
Backed by the successful integration of SABMiller, AB InBev has announced a few organizational changes to improve focus on top line and value creation. Expected to be effective from Jan 1, 2019, the changes mainly include simplifying the geographic structure by shifting from nine management zones to six. The new zones will be North America zone (unchanged), Middle Americas zone (comprising the current COPEC and Middle Americas zones and the BU Central America and Caribbean), South America zone (combining the current Latin America South zone and the BU Brazil), APAC zone (including the current Asia Pacific North and Asia Pacific South zones) and EMEA zone (reporting the combined results of Europe and Africa).
Further, the company is bringing the Marketing and ZX Ventures under a common global lead to better analyze market and consumer trends. The company will also create two new senior leadership positions to capture organic growth opportunities within existing business. Appropriately, the company has made leadership changes for the newly created zones.
Outlook
AB InBev issued guidance for 2018. Though management sees volatility in certain key markets, it anticipates delivering strong top-line and EBITDA growth for the full year, backed by solid brand performance and robust commercial plans. Driven by the focus on category development, the company expects net revenue per hl growth to exceed inflation while costs are expected to come below inflation. Moreover, premiumization and revenue management initiatives are likely to aid revenue per hl growth.
Furthermore, the company expects to witness accelerated growth in the second half of the year driven by the extension of learnings from its category expansion framework and best practices across markets. The company believes that it is well positioned to drive category growth across its diverse geographic footprint on an ongoing basis, given its strong portfolio of global and high-end brands.
Nonetheless, this Zacks Rank #4 (Sell) company reiterated the synergy and cost-savings guidance at $3.2 billion that was announced in August 2016. Of this, nearly $547 million was reported by SABMiller as of Mar 31, 2016, and about $1,945 million captured between Apr 1, 2016 and Jun 30, 2016. The company expects to achieve the remaining synergies of nearly $700 million by October 2020.
For 2018, management anticipates normalized effective tax rate of 24-26%. Net capital expenditures are projected between $4 billion and $4.5 billion. AB InBev envisions dividend growth to be modest in the near term due to increased importance of deleveraging. However, dividends are likely to grow gradually in the long term.
Boston Beer has long-term earnings growth rate of 9.5%. Moreover, the stock has surged 42.6% in the last three months.
Darling Ingredients has rallied 15.4% in the last three months. The company delivered an average positive earnings surprise of 106.1% in the last four quarters.
Turning Point delivered positive earnings surprise of 16.7% in the preceding quarter. Moreover, the stock has rallied 58.9% in the last three months.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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AB InBev (BUD) Tops on Q2 Earnings & Sales, Simplifies Zones
Anheuser-Busch InBev SA/NV (BUD - Free Report) , also known as AB InBev, reported better-than-expected earnings and revenues in second-quarter 2018, while sales dropped year over year. This marked the reversal of the company’s negative earnings surprise trend. Notably, the company has reported an earnings miss in eight of the nine preceding quarters. However, revenues surpassed estimates for the third straight quarter.
Overall, shares of AB InBev have gained 9.2% in the past month, outperforming the industry's increase of 4.5%.
Q2 Highlights
Normalized earnings per share of $1.10 rose 15.8% year over year from 95 cents in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $1.05. The company gained from improving trends in key markets and continued premiumization in the majority of its markets.
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
Revenues declined 1.2% to $14,014 million but surpassed the Zacks Consensus Estimate of $13,885 million. Moreover, the company registered organic revenue growth of 4.7%, courtesy of a 4.5% rise in revenues per hectoliter (hl) on a constant-geographic basis. The increase stemmed from ongoing revenue management initiatives along with strong performance of premium brands. Also, revenues per hl advanced 4% on a reported basis.
Consolidated revenues at the company’s three global brands — Budweiser, Corona and Stella Artois -- improved a substantial 10.1% globally and 16.7% outside home markets.
Total volumes advanced 0.8% with own-beer volumes rising 0.9% and non-beer volumes up 0.5%. Own-beer volumes gained from growth in Mexico and China, partly mitigated by softness in the United States and South Africa.
Cost of sales dropped 4.6% year over year to $5,196 million, while the same rose 4.7% organically. Further, organic cost of sales per hl grew 4.2%. On a constant-geographic basis, cost of sales per hl increased 5.5%. The increase was driven by higher currency rates and commodity prices as well as increased country mix, partly negated by synergy capture.
The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $5,568 million, up nearly 4% year over year and 7% on an organic basis. The increase was driven by solid top-line growth as well as gains from cost synergies, partly negated by higher sales and marketing investments for the FIFA World Cup in Russia. EBITDA margin expanded 190 basis points (bps) to 39.7% while the same increased 85 bps organically.
Organizational Changes
Backed by the successful integration of SABMiller, AB InBev has announced a few organizational changes to improve focus on top line and value creation. Expected to be effective from Jan 1, 2019, the changes mainly include simplifying the geographic structure by shifting from nine management zones to six. The new zones will be North America zone (unchanged), Middle Americas zone (comprising the current COPEC and Middle Americas zones and the BU Central America and Caribbean), South America zone (combining the current Latin America South zone and the BU Brazil), APAC zone (including the current Asia Pacific North and Asia Pacific South zones) and EMEA zone (reporting the combined results of Europe and Africa).
Further, the company is bringing the Marketing and ZX Ventures under a common global lead to better analyze market and consumer trends. The company will also create two new senior leadership positions to capture organic growth opportunities within existing business. Appropriately, the company has made leadership changes for the newly created zones.
Outlook
AB InBev issued guidance for 2018. Though management sees volatility in certain key markets, it anticipates delivering strong top-line and EBITDA growth for the full year, backed by solid brand performance and robust commercial plans. Driven by the focus on category development, the company expects net revenue per hl growth to exceed inflation while costs are expected to come below inflation. Moreover, premiumization and revenue management initiatives are likely to aid revenue per hl growth.
Furthermore, the company expects to witness accelerated growth in the second half of the year driven by the extension of learnings from its category expansion framework and best practices across markets. The company believes that it is well positioned to drive category growth across its diverse geographic footprint on an ongoing basis, given its strong portfolio of global and high-end brands.
Nonetheless, this Zacks Rank #4 (Sell) company reiterated the synergy and cost-savings guidance at $3.2 billion that was announced in August 2016. Of this, nearly $547 million was reported by SABMiller as of Mar 31, 2016, and about $1,945 million captured between Apr 1, 2016 and Jun 30, 2016. The company expects to achieve the remaining synergies of nearly $700 million by October 2020.
For 2018, management anticipates normalized effective tax rate of 24-26%. Net capital expenditures are projected between $4 billion and $4.5 billion. AB InBev envisions dividend growth to be modest in the near term due to increased importance of deleveraging. However, dividends are likely to grow gradually in the long term.
Three Hot Picks in the Consumer Staples Space
Some better-ranked stocks in the broader consumer staples sector include The Boston Beer Company, Inc. (SAM - Free Report) , Darling Ingredients Inc. (DAR - Free Report) and Turning Point Brands, Inc. (TPB - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boston Beer has long-term earnings growth rate of 9.5%. Moreover, the stock has surged 42.6% in the last three months.
Darling Ingredients has rallied 15.4% in the last three months. The company delivered an average positive earnings surprise of 106.1% in the last four quarters.
Turning Point delivered positive earnings surprise of 16.7% in the preceding quarter. Moreover, the stock has rallied 58.9% in the last three months.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>