AB InBev manages to top earnings estimates despite Bud Light boycott

Anheuser-Busch parent company AB InBev reported mixed second-quarter earnings, beating on adjusted EPS while revenue fell short by $290 million. While consumer boycotts of Bud Light over an ad featuring trans personality Dylan Mulvaney tanked revenue and sales in the U.S., operating profits ticked up and sales volumes in foreign markets grew.

Yahoo Finance Live's Julie Hyman and Myles Udland compare AB InBev's earnings narrative with the consumer narrative seen in U.S. sales.

Video Transcript

- Shares of AB InBev are up slightly this morning, up about 2%. Thanks to better than expected earnings. The Bud Light owner beat forecasts with a 7.2% increase in total revenue for the quarter. It was boosted by strong overseas sales in the Asia-Pacific market. But US sales did take a hit thanks to that boycott drama, following Bud Light's partnership with trans influencer Dylan Mulvaney, revenue in North America was down by 10.5%. EBITDA was down by 28%.

- So obviously, a big tumble there. But if you look at earnings and other regions here, overall adjusted earnings were up 5%. Brazil, China and Colombia saw earnings rise 20%. So this really was a US problem. And I won't say just a US problem, because US is a huge market for them. So it's not like it's a small problem, but it was a limited one.

- It is a relatively smaller problem for the overall AB InBev portfolio than perhaps, it seems when there is almost-- well not almost, there is weekly data that comes out on how much volumes are down for the Bud Light portfolio or the Budweiser portfolio is really the way it's phrased, in the US. Because it's about 18% by volume. North America is about 18% of the overall AB InBev worldwide volume. So 9.5% volume growth in its Asian market.

So that, I mean, overall volumes are down 1.4% in the quarter against last year. So you are still seeing an impact overall there. But there are pieces of the business that I think investors can get themselves excited about, certainly this morning. And ultimately, when you look at the way the stock has behaved this year, it has been a laggard in a market where everyone's getting excited about everything. And you are able to now maybe say, we can make sense of what is happening in this pocket of the business.

We understand why the US business is going to be challenged in all these different ways. But you know, I mean, another part of this portfolio in this trade is in the US, what has been the riser against Bud Light's fall? It's been Modelo. Well AB InBev doesn't have the US distribution rights, but they do have the rights in Mexico. And so as the Modelo brand on a global basis perhaps picks up some slack from Budweiser and Bud Light and related kind of plays there, they have the international play on that.

Constellation gets the US benefit. But internationally, and you know AB InBev called it out in their call, they are getting some of that lift elsewhere.

- Well, and the other thing I thought was interesting is they said that the market share losses in the US in Bud Light pretty much stopped at the end of April. That April to June was steady.

- Mm-hmm.

- So will they ever get that market share back? Maybe not. But maybe it's also not going to get worse. And you just have this resetting of expectations that have been priced into the stock to your point.

- Yeah. I mean, I think, there's probably-- maybe it's kind of a two-part story now where investors say, all right, I understand what happened here. I can make sense of it as an investor. I can get excited about those kinds of things. You buy back stock, pay a dividend, et cetera, et cetera. But there's an operational problem maybe where, OK, you had the number one beer in the US, and now you have the third or fourth whatever it is. I'm not sure if there's segment or we've seen some marketing exactly.

There are going to be ramifications I think at the corporate level. But for an investor story, for a stock that's down 6% when the S&P is up, 20% basically so far this year, that impact perhaps has maybe been felt to the most extreme event for investors and then the fallout will kind of come elsewhere in the business.

- Right. My random thought of the morning from a marketing perspective, how do you decide if you're going with L-I-G-H-T or L-I-T-E, a La, Bud Light versus Miller Lite. I don't know the answer to that.

- That's been baked for a long time. So I'll ask someone from the 60s or whatever when they made that decision.

- OK. I'll do that.