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Will AB InBev (BUD) Manage to Deliver a Surprise in Q1?

Anheuser-Busch InBev SA/NV BUD, alias AB InBev, is slated to release first-quarter 2017 results on May 4. The big question facing investors is whether this leading alcohol-beverage company will be able to deliver a positive earnings surprise in the quarter to be reported.

Last quarter, the company had delivered a negative earnings surprise of 58.3%. In fact, it has reported negative surprise in each of the trailing four quarters, with an average miss of 33.2%. Let’s see how things are shaping up for this announcement.

Anheuser-Busch Inbev SA Price and EPS Surprise


Anheuser-Busch Inbev SA Price and EPS Surprise | Anheuser-Busch Inbev SA Quote

Factors Influencing This Quarter

AB InBev is on track with the integration of the recently acquired brewing giant SABMiller. The company is currently in the process of divesting SABMiller assets that it promised as part of the merger deal. Despite the divestitures, this combined mega-brewing company still holds the top spot in the beer industry, controlling about one-thirds of the global beer market. This behemoth accounts for nearly 30% of global beer sales and 46% of global beer profits.

However, the company has reported dismal earnings for four straight quarters now. In the last reported quarter, the company’s results were primarily hurt by a disappointing Brazilian performance, which in turn was marred by difficult consumer trends, tough year-over-year comparisons and unfavorable currency movements. Further, it provided dismal guidance for 2017.

While the company expects revenues to grow in 2017 backed by robust growth of global brands and commercial plans, it projects some of its key markets to remain volatile. Further, AB InBev anticipates cost of goods sold per hl to increase in the low-single digits range, considering adverse currency movements and growth in premium brands. Also, SG&A expenses are expected to be flat with 2016 level.

This is reflected in AB InBev’s stock performance that has underperformed the broader industry in the last six months. The stock has declined 6.2%, wider than the Zacks categorized Beverages–Alcohol industry's fall of 3.4%.

However, the Zacks Consensus Estimates for the first quarter have witnessed an uptrend ahead of the company’s earnings release. Estimate of $1.00 per share has climbed 44.9% in the last seven days, while reflecting a 96.1% growth from the year-ago quarter. Analysts polled by Zacks expect revenues of $12.87 billion for first-quarter 2017, exhibiting a 36.9% growth from the year-ago quarter.

Given the mixed factors, we prefer to wait and see what is in store for this beverage giant in the upcoming results.

Earnings Whispers

Our proven model does not conclusively show that AB InBev is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for AB InBev is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.00. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AB InBev currently carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Rocky Brands Inc. RCKY, expected to release earnings on Apr 27, currently has an Earnings ESP of +77.78% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pinnacle Foods Inc. PF, scheduled to report earnings on Apr 27, currently has an Earnings ESP of +2.17% and a Zacks Rank #2 (Buy).

Lowe's Companies, Inc. LOW, slated to release earnings on May 24, currently has an Earnings ESP of +2.86% and a Zacks Rank #2.

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Anheuser-Busch Inbev SA (BUD): Free Stock Analysis Report
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