Sturdy third quarter performance facilitated the shares of Companhia de Bebidas Das Americas (ABV), alias AmBev, to reach a new 52-week high of $45.84 on Friday, Jan 25, beating its previous 52-week high of $45.62. This Zacks Rank #2 (Buy) Brazilian beer giant represented a healthy return of 14.9% over the past six months. Average volume of shares traded over the last 3 months stands at approximately 1,785,400.
Drivers that Triggered Momentum
An impressive third quarter beat, improved margins and strong financial position are the attributes that pushed the shares of AmBev to a new high.
AmBev reported robust third-quarter 2012 normalized earnings of R$0.81 per share, substantially beating the prior-year quarter’s earnings of R$0.53 by 52.6%. The results were primarily driven by solid top-line performance, higher margins and lower tax rate. In the U.S. dollar terms, earnings came at 39 cents per share, which beat the Zacks Consensus Estimate of 35 cents.
Reported net sales increased 26.1% to R$8.036 billion compared with R$6.375 billion in the prior-year quarter. The increase in revenues was primarily attributable to a marginal hike of 1.5% in volumes across all regions. On an organic basis, total revenue jumped 15.1% from the prior-year quarter despite a 0.5% decline in overall organic volume.
In spite of the input cost pressure, organic gross profit escalated 17.1% to R$5.414 billion compared with R$4.244 billion in the year-ago quarter. Gross profit margin expanded 120 basis points (bps) organically to 67.4%, primarily driven by margin expansion at every business unit.
AmBev’s financial position remained strong at the end of the quarter with cash and cash equivalents of R$4.531 billion and shareholders’ equity of R$27.496 billion. The company generated R$4.366 billion of cash from its operating activities. Moreover, it paid a dividend and IOC of R$1.2 billion to its shareholders during the quarter.
Besides AmBev, other beverage-alcohol companies like Constellation Brands Inc. (STZ), Brown-Forman Corporation (BF.B) and Beam Inc. (BEAM) posted robust earnings results in the recently reported quarters.
Stock’s Key Indicators
AmBev currently trades at a forward P/E of 25.2x, 41.7% above the peer group average of 17.8x. Its price-to-sales ratio of 9.3x also remains substantially higher than the peer group average of 3.1x. Moreover, the company’s return-on-investment (ROI) and return-on-asset (:ROA) are 34.3% and 19.9%, respectively, which are significantly higher than the peer group average.
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