AB InBev Looks Defensive As It Successfully Pushed Through Significant Price Increases in Q4

The impact of having to pass through extreme levels of inflation was evident in Anheuser-Busch InBev’s ABI 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.

Fourth-quarter revenue increased 10.2% organically year over year (and was up 11.2% in the full year). This was entirely driven by price/mix, forced higher by severe inflation in raw material costs, and volume was down 0.6% organically in the fourth quarter and up 2.3% in the full year. The volume decline was slightly disappointing given the FIFA World Cup 2022 was held in the fourth quarter, and was driven by a sharp 8.3% decline in North America. However, in the context of almost 11% higher prices in the region during the fourth quarter, we think AB InBev’s performance is fairly defensive so far, with price elasticity being quite robust.

We are making no changes to our forecasts, and our 2023 EBITDA estimate of USD 21 billion is bang in the middle of management’s guidance of 4% to 8% growth. We anticipate another challenging year of passing through inflation, and we believe visibility into earnings growth is lower than usual, but with the U.S. producer price index now off its peak, it is possible that cost pressures will ease by the end of the year.