Company Reports

Carlsberg released its first-quarter trading statement, with reported revenue growth of 17.4% year over year, with an acquisition impact of 18.4%. On an organic basis, revenue declined 1.5%, slightly below consensus. Shares were down nearly 2% at the market open on April 29.

We are relaunching coverage of four of the largest global brewers: InBev, Ambev, Heineken, and Carlsberg. We are maintaining our Morningstar Economic Moat Ratings of wide for InBev and Ambev, upgrading Heineken to wide from narrow, and upgrading Carlsberg to narrow from none. Ambev is our preferred pick, as we believe the market does not fully reflect its region-leading growth potential, offering 33% upside from current levels.

Carlsberg is the third-largest brewer globally, with strong positions in several markets including western China and Scandinavia. Through its strong market share, the firm has built up regional cost advantages, enabling superior procurement, manufacturing, and distribution efficiencies. Carlsberg’s scale benefits coupled with its entrenched relationships and route-to-market strategy should enable the firm to continue to earn excess economic profits over the next decade.

We maintain our DKK 970/$28 fair value estimate for no-moat Carlsberg after the firm reported 2024 results in line with our expectations. As with peers, a challenging consumer environment in key markets led to lower-than-expected volume growth. Despite headwinds throughout 2024, Carlsberg reached the top end of its full-year profitability guidance with 6% organic operating profit growth, largely driven by efficiencies. Due to near-term uncertainty, management provided broad 2025 guidance of 1%-5% organic operating profit growth. Nevertheless, the firm is confident that it can meet its long-term targets. The stock was up 6% following the announcement, and we continue to view it as undervalued. Still, we prefer our wide-moat companies in the brewing industry that have stronger market positions.

No-moat Carlsberg reported its third-quarter trading update for 2024, which was in line with our expectations. Similar to its peers, a challenging consumer environment dimmed Carlsberg’s top-line growth in the quarter. Nevertheless, management maintained its full-year outlook including organic operating profit growth of 4%-6%. Therefore, we maintain our DKK 970 per-share fair value estimate and continue to view the stock as undervalued. Still, we prefer our wide-moat stocks in the brewing industry, which have broader portfolios.

Carlsberg has a reasonably strong namesake brand and a portfolio of superpremium brands that position it well for ongoing premiumization. It has strong positions in a cluster of generally small markets, notably Scandinavia and western China, but is a second-tier player in other larger markets such as the UK, Germany and Vietnam.

Carlsberg delivered modest results for the first half of 2024, slightly missing on some estimates from company-compiled consensus. However, management remains confident about the second half of the year and updated the 2024 outlook for organic operating profit growth to 4%-6% from 1%-5% previously. During the second quarter, Carlsberg announced several upcoming acquisitions, which will increase leverage, leading to the termination of the earlier proposed share buyback. We keep our fair value estimate of DKK 970 per share.

No-moat Carlsberg reported revenue growth of 4.4%, broadly in line with our estimates and company-compiled consensus. Results were driven by volume growth and revenue per hectoliter growth, partially offset by negative currency effects. The outlook for 2024 remains unchanged, with organic operating profit growth expected to be between 1% and 5%. Management plans to increase the marketing investment for the full year by more than 10% to support its long-term growth initiatives while keeping the overall ratio of selling, general, and administrative expenses flat as a percentage of revenue. Due to the group's strong financial position, the company also announced a new quarterly buyback program amounting to DKK 1 billion, running from April 30 to Aug. 9. The share price remained broadly stable at the time of writing. We make no change to our DKK 970 fair value estimate.

Carlsberg has a reasonably strong namesake brand and a portfolio of superpremium brands that position it well for ongoing premiumisation. It has strong positions in a cluster of generally small markets, notably Scandinavia and western China, but is a second-tier player in other larger markets such as the UK, Germany and Vietnam.

Carlsberg has a reasonably strong namesake brand and a portfolio of superpremium brands that position it well for ongoing premiumisation. It has strong positions in a cluster of generally small markets, notably Scandinavia and western China, but is a second-tier player in other larger markets such as the U.K., Germany and Vietnam.

Carlsberg modestly beat our expectations for fourth-quarter revenue, and this trickled down the income statement to deliver full-year 2023 adjusted earnings per share of DKK 51.1, marginally above our forecast. Guidance for 2024 is slightly below our estimates amid increased investment and continued uncertainty in China. More significantly, however, management unveiled a new strategic plan, Accelerate SAIL, which includes improved medium-term revenue growth forecasts of 4% to 6%, up from the previous guidance of 3% to 5%. For now, we are retaining our steady state revenue growth estimate of 4% but will review whether we believe premiumization and footprint expansion will unlock faster growth. We are retaining our DKK 870 fair value estimate and no-moat rating.

Carlsberg reported a broadly in-line third-quarter trading update, but we are lowering our fair value estimate to DKK 870 per share from DKK 970 due to the value destruction created by the loss of the company's Russian business. Carlsberg had been attempting to find a buyer for Baltika Breweries in order to comply with sanctions against Russia, but we now believe it will not receive any compensation for these assets, and we assign a zero value to them. The market appears to have anticipated this development, and we believe the stock is fairly valued.

Carlsberg has a reasonably strong namesake brand and a portfolio of superpremium brands that position it well for ongoing premiumisation. It has strong positions in a cluster of generally small markets, notably the Nordics and western China, but is a second-tier player in other larger markets such as the U.K., Germany and Vietnam.

Jacob Aarup-Andersen has assumed his role as CEO of Carlsberg, slightly earlier than expected, replacing Cees 't Hart after eight successful years. This has no effect on our DKK 970 fair value estimate, our no-moat rating, or our view that the shares are fairly valued.

Not for the first time in recent quarters, Carlsberg posted revenue growth marginally above our estimates in the first quarter of 2023, driven by implementation of price increases. Although volume was slightly weaker than our forecast, consumers appear to remain willing to accept higher prices, and revenue growth was very strong. Management raised the lower end of its full-year guidance, but with stiffening currency headwinds offsetting the revenue upside in the quarter, we make no change to our DKK 970 fair value estimate, despite minor tweaks to our near-term forecasts.

Carlsberg has a reasonably strong namesake brand and a portfolio of superpremium brands that position it well for ongoing premiumisation. It has strong positions in a cluster of generally small markets, notably the Nordics and western China, but is a second-tier player in other larger markets such as the U.K., Germany and Vietnam.

Carlsberg reported few surprises in its fourth-quarter and full-year 2022 results, with volume and revenue growth bang in line with our estimates, but operating profit was slightly weaker than we had anticipated. Guidance for 2023 implies a fairly wide range of operating profit development, from a 5% decline to 5% growth, but this is consistent with our existing forecast of low-single-digit growth. Although this represents a material slowdown in growth, following several years of impressive financial performance, it is to be expected in light of the pressures on consumer spending from inflation and rising interest rates. We reiterate our DKK 970 fair value estimate, and with the market value of the company having fluctuated considerably over the last 12 months, the stock now appears fairly valued. We think there is more valuation upside to Anheuser Busch InBev.

Carlsberg reported a fairly robust third-quarter trading update, with both volume and price/mix positive contributors to growth that was marginally better than our forecasts. Management raised guidance for the rest of the year as a result. The upside to the third-quarter volume puts our estimate squarely in the middle of management's new guidance for 10%-12% organic operating profit growth, and we make no changes to our estimates for the rest of the year. We also retain our DKK 970 fair value estimate and no-moat rating. multiple revenue growth drivers combining to beat our forecasts. Carlsberg's stock has retreated from its frothy valuation in recent months, and now appears to offer modest upside to the current market value. However, we prefer AB InBev, which we believe is a higher quality business due to its high market shares and because it has more exposure to valuation levers including any weakening of the U.S. dollar.

Carlsberg reported strong first-half results, with multiple revenue growth drivers combining to beat our forecasts. The margin performance was particularly impressive, with growth and operating leverage driving a comfortable beat to our forecasts and prompting management to raise full-year guidance. These results will probably stand out among Carlsberg's peer group for the ability to expand margins in this environment of rampant inflation. We are raising our fair value estimate to DKK 970 per share from DKK 910 to reflect the stronger-than-expected price/mix, as we suspect this may be able to continue. Nevertheless, after a strong run-up in the stock since March, we now believe Carlsberg is fairly valued.

Until recently, Carlsberg had underperformed its close peers. Although it has a very strong competitive positioning in its native Denmark and other Scandinavian markets, in other major developed markets it is a second-tier player and has suffered shelf space loss, including the high-profile removal of the flagship brand from Tesco's shelves in 2015. In addition, Carlsberg's second-largest market, Russia, has been undergoing volume declines since 2012 due to a decadelong government clampdown on the availability and affordability of beer and a shrinking drinking age population. Returns on invested capital were regularly below the cost of capital, and the low-teens operating margin was below that of the firm's largest competitors.