AB InBev's Q3 Better Than Expected Amid Lockdowns and Inflation

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.