The world’s largest brewer, Anheuser-Busch InBev SA/NV (BUD), also known as AB InBev, posted mixed results for third-quarter 2014, wherein both top and bottom lines marked a year-over-year improvement but fell short of the Zacks Consensus Estimate. The company revealed that quarterly performance was negatively impacted by inventory cut by U.S. wholesalers and stagnant demand in Brazil after the 2014 FIFA World Cup.
AB InBev’s third-quarter normalized earnings of $1.42 per share increased 4.4% from the year-ago level of $1.36. The company’s bottom-line results mainly benefited from strong revenue and organic EBITDA growth and lower financing costs. However, quarterly earnings were below the Zacks Consensus Estimate of $1.50.
Revenues for the quarter registered organic growth of 2.3% and reached $12,239 million. However, it fell short of the Zacks Consensus Estimate of $12,465 million. The year-over-year organic growth was mainly driven by a 4.3% rise in revenues per hectoliter (hl) resulting from the company’s ongoing revenue management and premiumization initiatives, partially offset by a 2.6% fall in total volume.
In the said quarter, cost of sales grew 2.9% organically to $4,966 million primarily due to higher depreciation charges owing to increased investment in Brazil and rise in packaging costs in Mexico. On a constant geographic basis, cost of sales increased 6.7% per hl.
The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) grew 1.3% year over year to $4,745 million, while as a percentage of sales it contracted 37 basis points to 38.8%.
Dividend
Concurrent with third-quarter results, the company’s board declared an interim dividend of €1 for 2014 to be payable on Nov 14 to the shareholders of record as on Nov 13.
Outlook
Despite a challenging macroeconomic environment, AB InBev expects improvement in volume in the U.S., Mexico, Brazil and China. The company’s net revenue per hectoliter will likely grow at par with inflation while cost of goods sold per hectoliter is expected to increase in the low-single digits. Furthermore, AB InBev intends to make capital expenditure of $3.7 billion for innovation and capitalization of emerging opportunities in the market.
Other Stocks to Consider
AB InBev currently has a Zacks Rank #3 (Hold). However, better-ranked companies worth considering in the broader beverage industry include Dr Pepper Snapple Group, Inc. (DPS), Keurig Green Mountain, Inc. (GMCR) and Monster Beverage Corporation (MNST), all carrying a Zacks Rank #2 (Buy).
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