AB InBev falls after cut to underweight at JPMorgan on rising raw material costs

  • Anheuser-Busch InBev (NYSE:BUD) dropped 2.2% in premarket trading after it was cut to underweight from neutral at JPMorgan as beer conglomerate is likely to cut earnings further as raw material costs increase.
  • AB InBev is seeing the “largest raw material headwinds” the company has ever faced, pushing JPMorgan to cut its FY22 earnings estimate by 6%, which puts the firm 10% below consensus estimates, according to JPMorgan analyst Celine Pannuti. The price target was also cut to $57 for the period ending December 2022.
  • The JPMorgan analyst sees AB InBev (BUD) “hedged raw material basket” increasing by a “substantial” 27% in FY22.
  • “Valuation appears relatively un-stretched as shares have de-rated off of June highs, but remains in-line with its LT average and we believe the recent underperformance still fails to fully appreciate the significant short- and medium-term earnings risks in addition to ongoing balance sheet (and FX) risk,” Pannuti wrote in a note.
  • Last month, Evercore ISI had a very different view on AB InBev seeing a potential ripping of +40% gain as recovery plays out.

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