Anheuser-Busch InBev (BUD)’s latest earnings report suggests that the backlash against its line of beers like Bud Light isn’t over yet.The company has lost its market dominance The U.S. beer market and its overall North American volumes have been in steady decline for several months.
The good news, though, is that sales in all of Anheuser-Busch’s other regions beat expectations, allowing the company to mitigate the reputational risk it faces in the United States. This has already helped prevent further declines in Anheuser-Busch’s stock, and as investors ponder what’s next for the company, this article highlights some major developments that will help provide a sense of where the company is headed. The share price could rise in the next few months.
story so far
Since my latest article was published article In an Anheuser-Busch report in June, the company’s stock barely moved in either direction, and there’s reason to believe the stock will remain at current levels for the foreseeable future. That’s as sales of the company’s flagship beer, Bud Light, continue to decline in the U.S. due to ongoing boycotts.
Anheuser-Busch effort Overcome resistance by changing marketing strategies, latest Report shows that the company has not been successful so far. While Anheuser-Busch continues to command the lion’s share of the U.S. beer market thanks to its large portfolio of brands, the company’s overall sales in the region fell 11% year-over-year. Meanwhile, sales of the company’s Bud Light fell 26.4 percent, lost Has maintained its position as the best-selling beer for the past two decades special model.
More importantly, the latest data show that Anheuser-Busch’s total second-quarter sales fell 1.4% to 147.6 million hectoliters, mainly due to poor performance in the United States, revenue contracted by 10.5% year-on-year during the period. Meanwhile, sales in North America were slightly better, falling just 9% year-over-year to $3.95 billion in the second quarter, thanks to higher sales in Canada.Looking ahead, it’s hard to see how Given Anheuser-Busch’s brand reputation has been tarnished in recent months, and its efforts to improve the situation have so far been unsuccessful, it will soon be able to significantly improve its performance in one of its largest markets.
The good news for Anheuser-Busch is that America isn’t alone in the game. As a global company with hundreds of different brands, Anheuser-Busch was able to offset its weak performance in the U.S. with higher sales in other markets.
The latest second-quarter financial report shows that the company’s overall revenue increased by 7.2% year-on-year to US$15.12 billion. Meanwhile, gross profit came in at $8.1 billion, and EPS came in at $0.72, beating estimates of $0.69.
This improvement in sales suggests that Anheuser-Busch is performing better than expected despite an overall decline in volumes due to higher prices in other markets. What’s more, after such results, the company reiterated its bullish outlook, still expecting EBITDA growth of 4% to 8% in 2023. Such growth is likely to be achieved through further strengthening of the company’s presence in regions such as the Middle East. Organic revenue and profit in the Americas and South America continued to grow at an aggressive pace and were able to cushion the poor performance in North America.
With all of this in mind, the main question now should be whether it makes sense to acquire Anheuser-Busch stock at the current prices that have stabilized in recent weeks. Back in June, I already did a DCF model, show The company’s fair value is $65.28 per share. However, I also noted at the time that if sales in North America deteriorated due to the boycott, the upside could be lower than previously thought.
Since we already have new data, I decided to update my model and revise the top line assumptions, which are now largely in line with the new data on the street estimate and suggest slightly lower growth in the ensuing years than previously assumed. All other assumptions in the updated model were held constant, since boycotts did not affect them that much.
The updated model puts Anheuser-Busch’s fair value at $63.60 per share, slightly lower than previous calculations but still up about 11% from current levels.
the bottom line
From a valuation standpoint, Anheuser-Busch is a buy, as its shares are undervalued due to the recent decline in its stock price due to the U.S. boycott of its products. The latest successful earnings results show that the company also has the ability to reduce reputational risk, as the company’s operations in different parts of the world are able to offset the impact of the boycott.
Still, I’ve decided not to initiate a long position in the company, as the share price will likely continue to be impacted by negative headlines, which would kill any momentum and keep the stock in trouble.That’s why even with about 11% upside, it’s not worth being exposed to, because there’s better growth out there Chance market currently offers.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.