AB InBev (BUD) Q4 Earnings & Revenues Surpass Estimates
Anheuser-Busch InBev SA/NV BUD, also known as AB InBev, reported better-than-expected earnings and revenues for fourth-quarter 2018. Notably, the company reported earnings beat in three of the five preceding quarters. Further, revenues surpassed estimates in four of the last five quarters.
Overall, shares of AB InBev have declined 3% in the past three months against the S&P 500’s growth of 1.8%.
Q4 Highlights
Underlying earnings per share of $1.26 rose 1.6% year over year from $1.24 in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $1.15. The company gained from improving trends in key markets and continued premiumization in the majority of its markets.
Revenues declined 2.4% to $14,250 million but beat the Zacks Consensus Estimate of $13,870 million. However, the company registered organic revenue growth of 5.3%, courtesy of 4.6% rise in revenues per hectoliter (hl) on a constant-geographic basis. The increase stemmed from ongoing revenue management initiatives along with strong performance of premium brands. Further, revenue per hl advanced 4.9% on a reported basis.
Consolidated revenues at the company’s three global brands — Budweiser, Corona and Stella Artois — improved 9.8% globally and 12.6% outside their respective home markets.
Total organic volume advanced 0.3%, with own-beer volume rising 1.2% while non-beer volume declined 4.9%.
The cost of sales inched up 0.5% year over year to $5,193 million while grew 6.5% organically. Further, cost of sales per hl grew 6%, both organically and on a constant-geographic basis.
The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $6,166 million, which dipped 0.4% year over year but improved 10% on an organic basis. The increase in organic EBITDA was driven by premiumization, cost discipline and continued synergy capture. EBITDA margin expanded 90 basis points (bps) to 43.3% while it increased 190 bps organically.
Outlook
Following strong close to 2018, AB InBev issued 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 #4 (Sell) 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 $2,391 million captured between Apr 1, 2016, and Dec 31, 2018. The company expects to achieve remaining synergies of nearly $250 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 Alcohol Industry
The Boston Beer Company Inc. SAM has a long-term earnings growth rate of 10% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Diageo plc DEO has a long-term earnings growth rate of 8.4% and a Zacks Rank #2 (Buy).
Carlsberg AS CABGY, also a Zacks Rank #2 stock, has a long-term earnings growth rate of 5%.
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