Bear of the Day: Anheuser-Busch InBev (BUD)

Anheuser-Busch InBev BUD is a global brewing company with more than 500 iconic brands in its portfolio.The company’s leading position in the majority of its markets lends the advantage of economies of scale and growing its multi-country brands globally, like Budweiser, Bud Light, Corona, Stella Artois, Beck’s, and Michelob Ultra, among many others.

Q2 Earnings Recap

Total revenue improved by 27.6% while normalized EBITDA grew 31% year-over-year. Both metrics, however, missed analysts’ consensus estimates. The company’s top line advanced 3.2% compared to the same period in 2019.

Combined revenue from brands Budweiser, Corona, and Stella Artois increased 23% globally and 19.3% outside of their home markets.

Total volumes grew by 20.8%, with own beer volumes by 20.5% and non-beer volumes up 23.2%.

However, Anheuser was still bogged down by higher transportation costs and logistical difficulties like procuring enough cans for their beverage products.

Bottom Line

BUD is now a Zacks Rank #5 (Strong Sell).

Four analysts have cut their full year earnings outlook over the past 60 days. Anheuser’s bottom line is actually expected to increase about 42% year-over-year, but the consensus estimate has fallen $0.22 to $2.71 per share for fiscal 2021. Next year’s earnings consensus has dropped as well, but Wall Street expects earnings to increase by 17.9% to $3.20 per share.

Investors should note that BUD reports third-quarter results in the next couple of weeks, so the Zacks Rank and estimate figures could change.

Shares have been volatile so far in 2021. Year-to-date, BUD has fallen about 20% compared to the S&P 500’s gain of 20%.

Unfortunately, Anheuser looks to have yet to fully shake off the disruption brought on by Covid-19, so business could still be rocky for the time being.

The company’s guidance for the rest of the year was tepidly received by Wall Street; it expects EBITDA to “grow between 8-12% and our revenue to grow ahead of EBITDA from a healthy combination of volume and price.”

Additionally, Anheuser’s hard seltzer brand Bon & Viv still only controls a little over 1% of the market, which is not a good sign as the once high-growth beverage category looks to be cooling off.

BUD will likely face more volatility as coronavirus challenges linger, so those looking to buy the stock after its summer sell-off should be prepared for more ups and downs.

Those who are interested in adding a beverage stock to their portfolio could consider National Beverage Corp FIZZ. FIZZ is a #1 (Strong Buy) on the Zacks Rank. One analyst has raised their earnings outlook for the current fiscal year, and earnings are set to grow 5.4% year-over-year.

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