Breaking News

Does AB InBev (BUD) Stock Have Potential To Rebound In 2019?

By Zacks Investment ResearchStock MarketsJan 02, 2019 09:51PM ET
Does AB InBev (BUD) Stock Have Potential To Rebound In 2019?
By Zacks Investment Research   |  Jan 02, 2019 09:51PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Anheuser-Busch InBev SA/NV (NYSE:BUD) , also known as AB InBev, had a tough 2018, given the unfavorable industry trends resulting from consumers gravitating toward wine and other healthier options. This caused a steep fall in the volume of beer sold by the company, with most of the impact seen in the United States. Major consumer trends, such as premiumization, health and wellness, along with demographic changes in the population, are causing a segmental mix shift within beer.

Consequently, the company’s U.S. revenues fell 1.4% for the first nine months of 2018, mainly attributed to lower volume as its flagship Budweiser and Bud Light brands continued to lose market share. In the third quarter, Bud Light and Budweiser lost 90 basis points (bps) and 35 bps of the total market share, respectively. Further, the company’s total volume inched up 0.2%, with own-beer volume rising 0.5% while non-beer volume declined 2.4%. Beer volume growth in the quarter was mostly supported by strength in markets outside North America, including Mexico and Western Europe.

This industry turmoil also considerably weighed on the company’s top and bottom-line performance. Notably, AB InBev reported lower-than-expected earnings and revenues in third-quarter 2018. In fact, the company reported earnings miss in eight out of the 10 preceding quarters. Moreover, revenues missed estimates after three straight quarters of recording a beat. Earnings in the third quarter were mainly hurt by lower EBIT and higher income tax. Further, the company reported higher organic cost of sales due to increased commodity prices, which also hurt the bottom line.

The direct effect of the soft beer sales and a dismal surprise trend was visible in AB InBev’s stock performance through 2018. Notably, this Zacks Rank #3 (Hold) stock has lost about 42% in the past year, reflecting a wide gap from the industry’s 29.7% decline.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Indicating a Potential Rebound in 2019

Though the company’s graph so far has been disheartening, we see a potential to rebound in the new year, given its global brands’ strength, vast geographic reach and a robust forward view. Additionally, it may pick momentum from its recent venture in the fast-growing cannabis space.

Incidentally, the company entered a research partnership with medicinal cannabis manufacturer — Tilray, Inc. (NASDAQ:TLRY) — in late December 2018. This $100-million deal includes an equal investment by both the companies, enabling them to conduct joint research on non-alcoholic, cannabis-infused beverages. Notably, the alliance is confined to Canada alone, where marijuana has been recently legalized for recreational use.

Through this partnership, AB InBev is likely to bolster its position in the marijuana industry, courtesy of Tilray’s excellence in cannabis. Meanwhile, this cannabis maker will cherish AB InBev’s rich experience in beverages.

Coming to AB InBev’s fundamental strength, we note that the company’s combined brand portfolio with SABMiller (LON:SAB) includes more than 500 beer brands, including some of the most renowned beer brands worldwide like Budweiser, Corona and Stella Artois. Further, the robust portfolio includes seven of the top 10 global beer brands, with 18 brands generating over $1 billion in retail sales.

Further, the company extended its operations to North America, Latin America (North, South & West), Europe, Middle East and Africa (EMEA), and the Asia Pacific. Moreover, it sells its beers in more than 150 countries. This speaks volume of its vast geographic reach. Additionally, AB InBev’s foray into the craft beer space and its planned buyout of organic energy drinks, sparkling water and juice maker — Hiball, underscores its focus on exploiting all opportunities to drive top-line growth.

All these factors helped this Belgium-based company to carve an impressive niche, thus, emerging as the strongest player in the beer space.

Despite a soft third-quarter performance, the company’s global brands — Budweiser, Corona and Stella Artois — continued to reflect strength. Consolidated revenues for the global brands improved 7.7% globally and 10.6% outside home markets. Strength in global brands reflects the company’s potential to grow, backed by improving trends in key markets and continued premiumization in the majority of its markets.

Though AB InBev 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, premiumization and revenue management initiatives, the company expects net revenue per hl growth to exceed inflation while costs are expected to come below inflation.

Furthermore, 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. AB InBev envisions dividend growth to be modest in the near term due to the increased importance of deleveraging.

Bottom Line

While the company’s recent performance and industry trends indicate continued slowdown for AB InBev, we are optimistic of its rebound, given its cannabis venture, after leading alcohol makers like Constellation Brands, Inc. (NYSE:STZ) and Molson Coors Brewing Company (NYSE:TAP) made a mark in this space. Additionally, the company’s vast portfolio and reach, alongside a favorable outlook shed fears of further downside for the stock.

Moreover, the company’s expected long-term earnings growth rate of 6.6% and our Momentum Score of A indicate that the stock has upside growth potential.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Molson Coors Brewing Company (TAP): Free Stock Analysis Report

Constellation Brands Inc (STZ): Free Stock Analysis Report

Anheuser-Busch InBev SA/NV (BUD): Free Stock Analysis Report

Tilray, Inc. (TLRY): Free Stock Analysis Report

Original post

Zacks Investment Research
Does AB InBev (BUD) Stock Have Potential To Rebound In 2019?
Does AB InBev (BUD) Stock Have Potential To Rebound In 2019?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email