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AB InBev (BUD) Q1 Earnings Miss, Sales Beat on Strong Volume

Zacks Equity Research

Anheuser-Busch InBev SA/NV BUD, alias AB InBev, reported mixed first-quarter 2019, wherein earnings missed estimates but sales beat. Additionally, the bottom line improved year over year and sales declined from the prior-year quarter. This marked the company’s third straight earnings miss while revenues surpassed estimates for the second consecutive quarter.

Notably, the company delivered negative earnings surprise in four of the last six quarters while the top line beat estimates in five of the trailing six quarters.

Overall, shares of AB InBev have surged 15.2% in the past three months, outperforming the industry’s growth of 9.8%.


Q1 Highlights

Normalized earnings per share of $1.27 increased 74% year over year from 73 cents in the year-ago quarter. However, the bottom line missed the Zacks Consensus Estimate of $1.50. Earnings gained from improving trends in key markets and continued premiumization in majority of the markets, partly negated by adverse currency translations.

Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise


Anheuser-Busch InBev SA/NV Price, Consensus and EPS Surprise | Anheuser-Busch InBev SA/NV Quote

Revenues declined 3.9% to $12,589 million but marginally beat the Zacks Consensus Estimate of $12,550 million. Moreover, the company registered organic revenue growth of 5.9%, courtesy of 4.6% rise in revenues per hectoliter (hl) and strong volume growth. Top-line results were also aided by global premiumization and ongoing revenue management initiatives. Further, healthy performances in key markets, including Brazil, China, the United States, Europe, Colombia and Nigeria boosted the top line.

Total organic volume advanced 1.3%, with own-beer volume rising 1% and non-beer volume up 4.9%.

Consolidated revenues at the company’s three global brands — Budweiser, Corona and Stella Artois — improved 8.5% globally and 14% outside their respective home markets.

The cost of sales declined 2.5% year over year to $4,875 million but increased 6% organically. Further, the cost of sales per hl grew 4.6%.

The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) was $4,989 million, which dropped 2.7% year over year but improved 8.2% on an organic basis. EBITDA margin expanded 50 basis points (bps) to 39.6% while it increased 86 bps organically. This increase was driven by organic sales growth, robust brand mix, premiumization, ongoing cost discipline and synergy capture from the SAB merger. This was partly negated by significant commodity and currency headwinds.


AB InBev reiterates the encouraging guidance for 2019. The company anticipates delivering strong top-line and EBITDA growth for the year, backed by solid brand performance and robust commercial plans. Driven by increased focus on category development, it expects to deliver balanced top-line growth between volume and revenue per hl.  Net revenue per hl growth is likely to exceed inflation while costs (sum of cost of sales and SG&A) are expected to come below inflation. Premiumization and revenue-management initiatives are likely to aid revenue per hl growth.

The company projects cost of sales per hl to increase in a mid-single digit, with currency and commodity headwinds to be offset by cost-management initiatives.

Further, this Zacks Rank #3 (Hold) company reiterated synergy and cost-saving guidance at $3.2 billion that was announced in August 2016. Of this, nearly $547 million was reported by SABMiller as of Mar 31, 2016, and about $2,491 million was captured between Apr 1, 2016, and Mar 31, 2019. The company expects to achieve remaining synergies of nearly $150 million by the end of 2019.

For 2019, management anticipates normalized effective tax rate of 25-27%. Net capital expenditure is projected between $4 billion and $4.5 billion. AB InBev envisions dividend growth to be modest in the near term due to increased importance of deleveraging. However, dividends are likely to grow gradually in the long term.

Three Better-Ranked Stocks in the Beverage Industry

Ambev S.A. ABEV has a long-term earnings growth rate of 7.2% and a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PepsiCo Inc. PEP currently has a long-term earnings growth rate of 7.2% and a Zacks Rank #2.

New Age Beverage Corporation NBEV, also a Zacks Rank #2 stock, witnessed positive estimate revisions for the current year in the last 30 days.

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