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Factors to Decide the Fate of AB InBev (BUD) in Q1 Earnings

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Anheuser-Busch InBev SA/NV (BUD - Free Report) , also known as AB InBev, is slated to release first-quarter 2020 results on May 7. In the last reported quarter, it delivered a negative earnings surprise of 9.4%. Moreover, the company recorded a negative earnings surprise of 2.3%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for AB InBev’s first-quarter loss is pegged at 18 cents per share, whereas it reported earnings of $1.27 in the year-ago quarter. The consensus estimate has been unchanged in the past 30 days.

Key Factors to Note

AB InBev has been facing the heat of the novel coronavirus outbreak as authorities ordered shutdown of manufacturing facilities, and implemented social distancing and travel bans to curb the spread. Driven by the unprecedented impacts of the COVID-19 outbreak, the company has withdrawn its outlook for the first quarter and 2020. In February, when the virus outbreak was confined to China alone, management estimated a decrease in core profit (EBITDA) of 10% for the first quarter and a 2-5% decline for 2020.

Anheuser-Busch InBev SA/NV Price and EPS Surprise


Anheuser-Busch InBev SA/NV Price and EPS Surprise

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

On its fourth-quarter earnings call, management highlighted that the coronavirus outbreak 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 caused nearly $285 million of lost revenues and $170 million of lost EBITDA in the first two months of 2020.

With the virus spreading across all countries by mid-March, we expect the company’s top line to have been affected in first-quarter 2020. Further, AB InBev is expected to have witnessed continued impacts from adverse currency translations and commodity cost inflation in the to-be-reported quarter.

However, the company’s premiumization strategy, supported by strength in its global brands and High End Company, is anticipated to have partly cushioned the top line. Investments in the hard seltzer category are also expected to have aided sales. Moreover, the company has been on track with the smart affordability strategy, which is a category expansion framework that targets reaching new consumers and introducing beer to new occasions at affordable price points. Gains from the initiatives are likely to get reflected in the first-quarter results.

Zacks Model

Our proven model doesn’t predict earnings beat for AB InBev this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

AB InBev has a Zacks Rank #4 (Sell) and Earnings ESP of 0.00%.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat.

The Hain Celestial Group, Inc. (HAIN - Free Report) presently has an Earnings ESP of +9.24% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Campbell Soup Company (CPB - Free Report) has an Earnings ESP of +14.36% and a Zacks Rank #2 at present.

TreeHouse Foods, Inc. (THS - Free Report) currently has an Earnings ESP of +25.00% and a Zacks Rank #3.

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