After a significant pullback in the past four months, Anheuser-Busch InBev’s (BUD)/(ABI) shares look attractive. The brewer’s most recent results demonstrate again that its cost advantage--the key source of its wide economic moat--should help drive EBIT growth, even as industry organic growth settles into a groove of lower for longer.
AB InBev posted a solid fourth quarter, with revenue just shy of our estimate but above consensus and EBIT ahead of both, thanks to the speed of its cost savings. We are reiterating our $126 fair value estimate for the ADRs, as a slightly less aggressive medium-term EBIT margin assumption offsets the impact of the time value of money. We have lowered our valuation of the Belgium-traded shares to EUR 103 from EUR 105 to account for the strength of the euro against the U.S. dollar.
Philip Gorham, CFA, FRM does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.