RBC To Investors: This Bud's For You
For Anheuser Busch Inbev NV (NYSE: BUD), two opposites can be true at the same time: Q3 results were "deeply disappointing" and "not too bad," according to RBC.
The Analyst
RBC Capital Markets' James Jones upgraded Anheuser-Busch's Europe-listed stock from Sector Perform to Outperform with a price target lowered from EUR 79 to EUR 79.
The Thesis
Investors should consider taking advantage of the weakness in the beer giant's stock, as Jones said expectations were overly ambitious. The company's 4.5 percent organic revenue sales growth fell short of expectations but it "looks OK" compared to other staples companies. Organic margin growth "isn't a thing at AB InBev" anymore so investors shouldn't miss it.
The company also slashed its dividend payout in half, a move that wasn't "strictly necessary." However, the dividend reduction will improve the company's net debt to 3.8 times by 2020 (or 4.4 times excluding the 38 percent of Ambev's cash now owned by Anheuser-Busch) which is more manageable. After accounting for the dividend reduction, the stock will still yield more than the 2.5 percent average among consumer staples (excluding tobacco).
Jones said the stock looks to be oversold after falling 44 percent since the start of 2016.
Price Action
Shares of NYSE-listed Anheuser-Busch were trading higher by 3 percent to $76.40 early Monday morning.
Related Links:
Analysts Weigh In On Anheuser Busch Earnings, Dividend Cut
Barclays Turns Bullish On AmBev's Story
Latest Ratings for BUD
Oct 2018 | RBC Capital | Upgrades | Sector Perform | Outperform |
Oct 2018 | Jefferies | Downgrades | Buy | Hold |
Sep 2018 | Guggenheim | Initiates Coverage On | Buy |
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