Company Reports

Anheuser-Busch InBev, or AB InBev, has been acquisitive, having made transformative deals for Interbrew and Anheuser-Busch, and more recently acquiring Grupo Modelo, Oriental Brewery, and SABMiller. Management's strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business.

Anheuser-Busch InBev, or AB InBev, has been acquisitive, having made transformative deals for Interbrew and Anheuser-Busch, and more recently acquiring Grupo Modelo, Oriental Brewery, and SABMiller. Management's strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business.

Anheuser-Busch InBev, or AB InBev, closed the books on a miserable year with underlying full-year earnings per share of $3.05, in line with our forecasts although volume was again a shade below our estimate. We retain our wide moat rating and $90 fair value estimate for the ADRs. We believe that there is still material upside to the stock from its market value on Feb. 29 and that share gains from trading down and a boost from the declining dollar could provide triggers to capture some of that upside this year.

Anheuser-Busch InBev reported a quite strong third quarter that showed signs that its algorithm may be reverting to our medium-term forecast. The green shoots of optimism offered by this report that inflationary pressures may be easing and that margins stabilizing are good news. We retain our wide moat rating and $90 fair value estimate for the ADRs, but we raise our valuation of the Brussels-traded share class to EUR 85 from EUR 83 due to the slightly stronger U.S. dollar. We believe there is still material upside to the stock from its market value on Oct. 31.

Anheuser-Busch InBev, or AB InBev, has been acquisitive, having made transformative deals for Interbrew and Anheuser-Busch, and more recently acquiring Grupo Modelo, Oriental Brewery, and SABMiller. Management's strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business.

The severity of the impact of the Bud Light saga was visible in Anheuser-Busch InBev's first-half earnings report, but we take two major positives from the update. First, management's comments that Bud Light's share has not worsened since April, when a boycott of the brand began, suggests further downside risk from the marketing mishap is probably limited. Second, this was another indication that margins have bottomed in Latin America, a key driver of ABI's economic profit. We retain our $90 fair value estimate of the ADRs and our wide moat rating, and believe there is still material upside to the stock from its market value on Aug. 3.

Although volume and revenue were slightly weaker than our forecasts, the level of price increases implemented by Anheuser-Busch InBev in the first quarter of the year kept the gross margin stable and the firm remains comfortably on track to meet our full-year forecasts. While negative publicity around the marketing of Bud Light in the U.S. is affecting sentiment in the stock, we regard this as temporary noise and we think this was a solid performance in the first quarter. We retain our $90 fair value estimate and wide moat rating.

Anheuser-Busch InBev, or AB InBev, has been acquisitive, having made transformative deals for Interbrew and Anheuser-Busch, and more recently acquiring Grupo Modelo, Oriental Brewery, and SABMiller. Management's strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business.

The impact of having to pass through extreme levels of inflation was evident in Anheuser-Busch InBev's fourth-quarter and full-year 2022 results, as volume was slightly weaker than we had expected. However, the modest growth in gross profit confirms our thesis that AB InBev is roughly middle of the pack among the consumer product manufacturers in its ability to pass through pricing, and with revenue and operating profit close to our forecasts last year, we are retaining our USD 90 fair value estimate. We continue to think that AB InBev is undervalued and the strong regional scale of the business, particularly in Latin America, makes this a high-quality company.

Anheuser-Busch InBev reported third-quarter results that were broadly consistent with our forecasts. At a time when consumer products companies are passing through material cost increases to consumers, who are already facing higher interest rates and energy prices, we regard an in-line quarter as good news, and we expect the market to react positively. We reiterate our $90 fair value estimate for the ADRs and our wide moat rating We continue to think that ABI is undervalued and that the scale of the business and its strong relationships with its vendors make this a high-quality franchise.

Anheuser-Busch InBev beat our estimates of volume, revenue and EBIT growth in the second quarter and first half of the year. Latin America performed well, supported by the reopening of the on-premises channel in Brazil, while Asia was soft, in no small part to the tighter COVID-19 restrictions still being implemented in China. We continue to think AB InBev is undervalued and that the scale of the business and its strong relationships with its vendors make this a high-quality franchise. We reiterate our $90 fair value estimate for the ADRs.

Anheuser-Busch InBev, or AB InBev, reported solid first-quarter results, with the EMEA region being the standout. There are safer ways for investors to play the current inflationary environment within consumer staples, such as the distillers and prestige cosmetics companies, but the brewers are holding their own so far. First-quarter organic revenue grew by 11.1%, driven by strong price/mix of 8.1%, supported by continued volume momentum, which grew by 2.8% globally.

We are again lowering our fair value estimate for Carlsberg to DKK 910 from DKK 945 in light of the decision to exit Russia, but we are leaving other valuations across our European fast-moving consumer goods, or FMCG, coverage intact. Several companies have announced, over the last 24 hours, various exit strategies to dispose of their Russian assets. We expect this to destroy value for those companies that hitherto operated in Russia, but because it is a relatively low-margin market, write-downs in most cases are likely be limited to low single digits as a percentage of market capitalization.

We are lowering our net revenue and gross margin estimates for the European beverage companies under our coverage to reflect the expected impact of the conflict in Ukraine. The impact on our valuations is minimal, however, and the only fair value estimate we are lowering is that of Carlsberg, from DKK 965 to DKK 945. Following the impositions of sanctions, most of the beverage manufacturers have temporarily ceased exporting products to Russia, and although this has made headlines, exports into Russia represent a small segment of the market.

AB InBev reported a solid fourth-quarter performance, with price/mix driving revenue growth above our forecasts. Full-year revenue was also slightly above our estimate, but this has limited valuation impact and we are retaining our wide moat rating and $90 per share fair value estimate for the ADRs. We still believe there is upside to AB InBev. With strong emerging market exposure and a cost advantage in some of its scale markets, we think AB InBev should trade at multiples of normalized earnings at least as high as some of its competitors but do not expect this to happen until balance sheet leverage is reduced.

Anheuser-Busch InBev, or AB InBev, has been acquisitive, having made transformative deals for Interbrew and Anheuser-Busch, and more recently acquiring Grupo Modelo, Oriental Brewery, and SABMiller. Management's strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business. The payback period for the SABMiller deal has been much longer than usual, however, despite management executing well on costs. Since the deal, one road bump after another has caused EBITDA growth to slow; from craft beer in the U.S. to slowing demand in South Africa to the shutdown of the on-trade during the coronavirus, and net debt/EBITDA stood at 4.6 times at the end of 2021. We expect the merger and acquisition, M&A, playbook to be on hold for a year or two more until AB InBev deleverages its balance sheet.

In what will be welcome good news for shareholders, Anheuser-Busch InBev reported a decent third quarter, with price/mix driving revenue growth and gross margins higher than our estimates, which were above PitchBook consensus. If the higher prices passed through in the third quarter stick for the rest of the year, it's likely gross margin degradation will not be quite as pronounced as we had feared. We have slightly increased our full-year revenue and margin estimates, but this has no impact on our $90 per-share fair value estimate. We continue to believe AB InBev is a significantly undervalued high-quality business with a cost leadership position in the beer industry. With high levels of debt on its balance sheet, however, earnings are likely to be more sensitive to bad news, and the stock may continue to be volatile should inflation linger or economic growth slow.

Anheuser-Busch InBev beat our second-quarter 2021 volume growth estimates thanks to a strong performance in Latin America. The good news will be overshadowed, however, by concerns over short-term profitability. The first-half gross margin missed our estimates by around 60 basis points, and the retention of the guidance of full-year underlying EBITDA growth of 8%-12% implies that margins will continue to come under pressure throughout the rest of the year. This is not surprising, however, as most consumer staples companies, notably Unilever and Nestle, have reported that commodity cost inflation is beginning to bite. We have slightly lowered our gross margin forecast for this year and next. Although we had already anticipated material cost inflation, the prices of packaging materials and distribution costs have continued to increase since our last update.

Anheuser-Busch InBev reported a strong first quarter that beat our estimates on volume and revenue. Margins fell slightly year over year, in line with guidance, but this does not detract from what was a good quarter overall. The president of AB InBev's North America zone, Michel Doukeris, will replace Carlos Brito as CEO on July 1. We have pulled forward our recovery expectations and make no change to our $90 fair value estimate or our wide economic moat rating. Although the shares have recovered somewhat since full-year 2020 results were reported, we still see upside and think margin expansion next year could reassure investors that deleveraging will continue organically.

Anheuser-Busch InBev, or AB InBev, has been acquisitive, having made transformative deals for Interbrew and Anheuser-Busch, and more recently acquiring Grupo Modelo, Oriental Brewery, and SABMiller. Management's strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business. The payback period for the SABMiller deal has been much longer than usual, however, despite management executing well on costs. Since the deal, one road bump after another has caused EBITDA growth to slow; from craft beer in the U.S. to slowing demand in South Africa to the shutdown of the on-trade during the coronavirus, and net debt/EBITDA stood at 5.5 times at the end of 2020. We expect the merger and acquisition, M&A, playbook to be on hold for a year or two more until AB InBev delevers its balance sheet.