Stock Analysis & Ideas

Anheuser-Busch Drunk on Earnings

Anheuser-Busch (BUD) is a North American brewing company and is commercially known for its iconic products including Budweiser, Corona, and Stella Artois. I am bullish on the stock.

Earnings

The brewing giant produced a 12.1% revenue increase in its fourth quarter, in turn beating analysts’ estimates by $530 million.

Anheuser-Bush produced an increase of 23.5% in revenue of core brands, namely Budweiser, Stella Artois, and Corona. This comes as a welcome surprise and conveys to us as investors that the reopenings have stimulated demand for recreational activity industries, including the liquor business.

An interesting piece of information is that Anheuser-Bush now sells more than 50% of its products from its online platform. This will improve the efficiency of inventory management and customer targeting, translating into a more efficient company overall.

After beating on revenue, the firm announced a quarterly dividend worth $0.50 per share, yielding at 1.62%. Furthermore, the outlook remains bright, with Anheuser-Bush anticipating its medium EBITDA to grow up to 8%, with normalized earnings to be between 28%-30% for the full year of 2022.

Prospects

Anheuser-Busch holds a firm market position and could be one of the “safety plays” that investors will reach out to amid significant geopolitical tensions. The firm yields significant bargaining power over its suppliers and pricing advantages over its competitors. It may well be that the broader market will be affected by the geopolitical tensions; however, if stocks do manage to rebound, BUD stock will most likely be front and center.

Furthermore, if we look at things from a firm-specific vantage point, it needs to be considered that Anheuser-Busch has yielded operating cash flows worth 35.88% during the past month, which provides it with options of re-investing in its business or alternatively reducing its 129.84% leverage ratio to produce more residual to its investors.

Valuation

BUD stock is undervalued, with its PE ratio trading 10.37% below its 5-year average and its price to sales ratio 14.85% below its normalized average. In addition, the company holds a book value of 0.56X excess of its market value, suggesting that intrinsic value definitely isn’t an issue here.

Wall Street’s Take

Turning to Wall Street, Anheuser-Busch has a Moderate Buy consensus rating, based on 2 Buys and 1 Sell assigned in the past three months.

The average Anheuser-Busch price target of $75.58 implies 24.33% upside potential.

Concluding Thoughts

Anheuser-Busch is in tip-top shape to take advantage due to its market positioning. The market is in a severe drawdown, and many investors may seek high-quality, mature stocks, a choice which could support the purchase of BUD stock.

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