AB InBev (BUD) Q3 Earnings Lag Estimates, Revenues Beat

Anheuser-Busch InBev SA/NVBUD, alias AB InBev, reported lower-than-anticipated earnings in third-quarter 2021, while revenues surpassed estimates. Its top line also improved on a year-over-year and two-year basis. While normalized earnings per share (“EPS”) declined year over year, underlying EPS rose year over year and on a two-year basis. The company’s results reflected continued business momentum, owing to relentless execution, investment in its brands and accelerated digital transformation. Backed by the continued business momentum, it raised its EBITDA view for 2021.

The results also demonstrated the company’s fundamental strength as well as the continued resilience in the global beer category. It remains keen on making the most of investments in its portfolio over the years as well as rapidly growing its digital platform, including BEES and Zé Delivery.

Overall, shares of the Zacks Rank #5 (Strong Sell) company have declined 11.7% in the past three months compared with the industry’s fall of 7.4%.

Zacks Investment ResearchImage Source: Zacks Investment Research


Q3 Highlights

The company reported normalized earnings per share of 50 cents, down from 79 cents in the year-ago quarter. The bottom line also missed the Zacks Consensus Estimate of 64 cents.

Underlying earnings per share (normalized EPS, excluding mark-to-market gains and losses related to the hedging of share-based payment programs and the impacts of hyperinflation) were 85 cents in third-quarter 2021, up 6.3% from 80 cents earned in the year-ago quarter.

Revenues of $14,274 million improved 11.4% from the year-ago quarter and beat the Zacks Consensus Estimate of $13,423 million. It registered an organic revenue growth of 7.9%, primarily driven by robust volume and revenue per hectoliter (hl) growth. The company notes that revenues in the third quarter were more than the pre-pandemic levels, improving in the low-teens range from the third quarter of 2019.

Revenues per hl were up 4.3% on an organic basis, backed by revenue management and premiumization efforts. The total organic volume grew 3.4%, with a 2.8% increase in the own-beer volume and 7.8% growth in the non-beer volume.

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AnheuserBusch InBev SANV Price, Consensus and EPS Surprise

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The company’s premium portfolio reported revenue growth of 11.3% in the third quarter, leading the portfolio with 30% of revenue contribution. This included a strong performance of its three global brands — Budweiser, Corona and Stella Artois — which advanced 5% globally and 9.3% outside their respective home markets in the third quarter. The company remains focused on expanding its Beyond Beer portfolio, which has also been aiding the top line. Within the Beyond Beer portfolio, it reported triple-digit revenue growth for the canned cocktail brand, Cutwater and Brutal Fruit in South Africa.

The cost of sales increased 14.9% to $6,039 million and was up 11.6% on an organic basis.

The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) were $5,214 million, which rose 6.6% year over year and 3% on an organic basis. However, the normalized EBITDA margin declined 170 basis points (bps) to 36.5% and dipped 174 bps organically. EBITDA margins were impacted by negative currency translations and commodity headwinds as well as higher supply-chain costs in some markets. This more than offset the rise in revenues.

SG&A expenses increased 11.1% year over year to $4,379 million and 7.3% on an organic basis. Higher SG&A expenses can be attributed to a volume-driven rise in distribution costs and increased variable compensation accruals.

2021 Outlook

For 2021, AB InBev now expects EBITDA growth of 10-12% compared with 8-12% mentioned earlier. It continues to anticipate revenue growth higher than EBITDA growth, driven by strong volume and pricing.

Management anticipates a normalized effective tax rate of 28-30% for 2021, marking an increase from that reported in 2020. The year-over-year increase relates to the phasing out of the temporary COVID-19 measures and changes in tax attributes in some key markets. Net capital expenditure is projected to be $4.5-$5 billion for 2021, driven by higher investments in innovation and other consumer-centric initiatives to fuel the ongoing momentum.

3 Better-Ranked Beverage Stocks

The Duckhorn Portfolio, Inc. NAPA presently carries a Zacks Rank #2 (Buy). The company has a long-term earnings growth rate of 9.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Helen of Troy Limited HELE has an expected long-term earnings growth rate of 8%. It currently has a Zacks Rank #2.

Archer Daniels Midland Company ADM currently carries a Zacks Rank #2. It has a long-term earnings growth rate of 9%.

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