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AB InBev (BUD) Misses Earnings and Sales Estimates in Q4

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Anheuser-Busch InBev SA/NV (BUD - Free Report) , alias AB InBev, has reported fourth-quarter 2019 results, wherein earnings and sales missed estimates and declined year over year. This marked its second consecutive sales and earnings miss.

Overall, shares of the company have dipped 15.6% in the past three months compared with the industry’s decline of 7.2%.

 


Q4 Highlights

Normalized earnings per share of 48 cents declined 32.4% from 71 cents earned in the year-ago quarter. Moreover, the bottom line missed the Zacks Consensus Estimate of 53 cents. Earnings were mainly marred by soft top line and higher cost of sales.

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 price-consensus-eps-surprise-chart | Anheuser-Busch InBev SA/NV Quote

Underlying earnings per share (normalized EPS, excluding mark-to-market gains and losses related to the hedging of share-based payment programs, and the impact of hyperinflation) were 87 cents in fourth-quarter 2019, down 25.6% from $1.17 reported in the year-ago quarter.

Revenues of $13,334 million dipped 3.3% from the year-ago quarter and lagged the Zacks Consensus Estimate of $13,373 million. The company registered organic revenue growth of 2.5% along with a 0.9% increase in revenues per hectoliter (hl). Organic revenues benefited from the ongoing global premiumization and revenue management initiatives. However, these gains were offset by soft revenue per hl growth due to progress on its smart affordability strategy.

Notably, the company is accelerating the smart affordability plan in markets with tough macro-economic conditions. Its initiatives under the plan call for lower revenue per hl but offer incremental profits.

Total organic volume rose 1.6%, with a 0.8% increase in own-beer volume and a 4.8% rise in non-beer volume. The volume decline resulted from decreases in China and the United States, partly offset by strength in Mexico, South Africa and Colombia markets.

Consolidated revenues at the company’s three global brands — Budweiser, Corona and Stella Artois — improved 2.1% globally and 3.9% outside their respective home markets in the fourth quarter. Further, its High End Company (a portfolio of global, specialty and craft brands) revenues rose in double-digits in 2019. The improvement was mainly backed by the successful execution of the company’s premiumization strategy.

The cost of sales increased 4.1% to $5,269 million and 9.1% organically. Further, organic cost of sales per hl grew 7.3%.

The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $5,343 million, which declined 11.2% year over year and 5.5% on an organic basis. EBITDA margin contracted 350 basis points (bps) to 40.1% and declined 336 bps organically. The decline mainly resulted from higher cost of sales per hl.

Outlook

AB InBev revealed its outlook for the first quarter and 2020 based on the evolving situation due to the COVID-19 virus in China. The company notes that the coronavirus outbreak has led to a significant decline in demand across China in both on-premise and in-home channels. Further, it witnessed soft demand during the Chinese New Year, which was lower than that in the prior years, as it coincided with the coronavirus outbreak. The company stated that the outbreak has caused nearly $285 million of lost revenues and $170 million of lost EBITDA in the first two months of 2020.

It expects EBITDA growth of 2-5% for 2020, with the majority of growth likely to be witnessed in the second half. In the first quarter of 2020, the company expects EBITDA to decline 10%, driven by the impact of COVID-19. Further, it stated that its outlook for the first quarter and 2020 reflects the current evaluation of the scale and magnitude of COVID-19. However, this might change on any further developments of the outbreak.

For 2020, the company anticipates delivering top-line growth, with a balance between volume and revenue per hl. The Zacks Rank #4 (Sell) company projects cost of sales per hl to increase in mid-single digits.

Management anticipates normalized effective tax rate of 27-29% for 2020. Net capital expenditure is projected to be $5 billion. AB InBev expects modest dividend growth for the near term due to the increased importance of deleveraging. However, dividends are likely to grow gradually in the long term.

Three Better-Ranked Stocks in the Beverage Industry

Brown-Forman Corporation (BF.B - Free Report) has a long-term earnings growth rate of 7.5% and a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Coca-Cola Company (KO - Free Report) currently has a long-term earnings growth rate of 7.2% and a Zacks Rank #2.

Monster Beverage Corporation (MNST - Free Report) , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 13.5%.

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