Here's Why You Should Hold on to AB InBev (BUD) Stock Now
Anheuser-Busch InBev SA/NV BUD, alias AB InBev, has been favored by investors for quite some time, owing to its unique commercial strategy, strong brand portfolio and investments in operation excellence. This has been aiding market share growth across the majority of the key markets.
The expansion of the “Beyond Beer” portfolio along with investments in B2B platforms, e-commerce and digital marketing has been key drivers. The premiumization of the beer industry has also been a key growth opportunity for AB InBev.
The investors' bullish sentiments on the stock sustained after the company displayed a strong start to 2021, with better-than-expected top and bottom lines in first-quarter 2021. The company has delivered a trailing four-quarter earnings beat of 12.1%, on average. This underlines its operational excellence.
In the past 30 days, the company’s estimates for 2021 earnings per share have moved up 1%. For fiscal 2021, its earnings estimates are pegged at $3.15 per share, suggesting a rise of 64.9% from the year-ago reported figure.
The Zacks Rank #3 (Hold) stock has gained 8.2% in the past three months compared with the industry’s growth of 6.7%. Also, the company’s shares have comfortably outpaced the Consumer Staples sector’s growth of 1.3% and the S&P 500’s rally of 5.4%.
Image Source: Zacks Investment Research
Now let us discuss at length why you should hold on to the global brewing company.
We suggest holding on to the AB InBev stock as it has been investing to develop a diverse portfolio of global, international, and crafts and specialty premium brands in its markets. The company’s premium portfolio reported revenue growth of 28% in the first quarter of 2021, reflecting more than 30% of its total revenues. This growth is well reflected in the company’s bottom line as the premium brands attract higher profit per hectolitre (hl) compared with its core brands. The premium portfolio marked growth of more than 6% from 2017.
Apart from the premium brands, the company’s global brands lead the way in premiumization. Revenues for the three global brands — Budweiser, Corona and Stella Artois — were up 29.5% globally and 46.4% outside of their home markets in first-quarter 2021. The company’s all three global brands delivered double-digit revenue growth in the first quarter compared with the same periods of both 2020 and 2019.
AB InBev is steadfastly growing its Beyond Beer portfolio, including products such as Ready to Drink Beverages like Canned Wine and Canned Cocktails, Hard Seltzers, Cider, and Flavored Malt Beverages.
The Beyond Beer trend has been recently gaining popularity due to the rise in demand for low-alcoholic or non-alcoholic drinks. The company’s Beyond Beer business delivered $1.2 billion in revenues in 2020. Revenues from the business grew 40% in the first quarter of 2021. This incremental growth has contributed to the bottom-line improvement in the reported quarter. Its Beyond Beer products have a 20% higher gross profit per hl, on average, than traditional beer.
The United States is the company’s largest Beyond Beer market, representing about 50% of its global Beyond Beer volume. The company has significantly enhanced its Beyond Beer presence in the United States with the introduction of hard seltzers like Bud Light Seltzer, followed by the more recently launched Michelob ULTRA Organic Seltzer and Cacti.
The company is focused on expanding its hard seltzer presence in newer markets. This was demonstrated by the recent launch of Michelob ULTRA Hard Seltzer in Mexico, where it has already captured 45% of the market share of the developing seltzer segment. This represents more than the next three brands’ combined share in the region.
The company is also launching the Mike’s Hard brand, including the Mike's Hard Lemonade and Mike's Hard Seltzer variance, in markets outside the United States as part of its efforts to build the Beyond Beer portfolio globally. It expects the brand to be available in more than 20 countries by the end of 2021.
AB InBev has been investing in new capabilities for several years to better connect with customers and consumers by leveraging technology, such as B2B sales and other e-commerce platforms. The platforms remained more relevant amid the coronavirus pandemic as consumers were confined to their homes. Consumers are quickly shifting to in-home consumption occasions, which has led to growth in the e-commerce channel as well as finding new ways to connect with others.
Consequently, the company is witnessing an acceleration in the B2B platforms, e-commerce and digital marketing trends, which has been aiding growth in the past few months. Its proprietary B2B platform — BEES — captured more than $3 billion in gross merchandise value in the first quarter, reflecting growth of more than 50% from the fourth quarter of 2020. Notably, the company’s owned e-commerce business quadrupled in size in the first quarter.
Its courier platforms are now accessible in nine markets and 220 cities, catering to nearly 120 million customers. In Brazil, Ze Delivery has expanded substantially, delivering more than 14 million orders in first-quarter 2021, reflecting more than half of the amount delivered in all of 2020.
Possible Deterrents
Despite the robust initiatives and business trends, the company is not free from the COVID-related impacts. Boston Beer has been witnessing higher costs of sales, SG&A expenses and other costs, which have been partly hurting the bottom line. Adverse currency translations and headwinds from commodity, channel and packaging mix also continue to hurt the EBITDA margin.
Better-Ranked Stocks to Watch
Heineken NV HEINY has an expected long-term earnings growth rate of 5.2%. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chewy Inc. CHWY has an expected long-term earnings growth rate of 20%. It currently carries a Zacks Rank #2.
Archer Daniels Midland Company ADM, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 6.2%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
AnheuserBusch InBev SANV (BUD) : Free Stock Analysis Report
Heineken NV (HEINY) : Free Stock Analysis Report
Chewy Inc. (CHWY) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
