The world’s largest brewer, Anheuser-Busch InBev SA/NV (BUD), also known as AB InBev, reported strong fourth-quarter 2014 results with both the top and the bottom lines improving year over year and beating the Zacks Consensus Estimate.
AB InBev’s fourth-quarter normalized earnings of $1.54 per share increased 5.5% from $1.46 in the year-ago quarter. The company’s bottom-line results mainly benefited from strong revenue and organic EBITDA growth and lower financing costs. Quarterly earnings also surpassed the Zacks Consensus Estimate of $1.44.
Revenues for the quarter registered organic growth of 7.6%, reaching $12,018 million. Moreover, it surpassed the Zacks Consensus Estimate of $11,315 million. The year-over-year organic growth was mainly driven by a 7.6% rise in revenues per hectoliter (hl) resulting from the company’s ongoing revenue management initiatives and enhanced brand mix due to its premiumization strategies.
Total volumes remained flat in the fourth quarter, including 0.2% growth in own beer volumes and 3.6% increase in third party products, offset by a 1.8% fall in non-beer volume.
Cost of sales grew 6.6% organically to $4,636 million. On a constant geographic basis, cost of sales increased 7.5% per hl primarily due to higher depreciation and packaging charges in Brazil and rise in bottle costs in Mexico on the back of higher-than-expected demand for Corona globally.
The company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) grew 5.6% year over year to $5,066 million, while as a percentage of sales it contracted 81 basis points to 42.2%.
2014 Results
For 2014, the company’s adjusted earnings came in at $5.43 per share, up 10.6% from 2013 and ahead of the Zacks Consensus Estimate of $5.26. Revenues for the year grew 5.9% organically to $47,063 million. The company’s top line also beat the Zacks Consensus Estimate of $46,849 million.
Dividend & Share Repurchase
Concurrent with fourth-quarter results, the company’s board proposed a final dividend of €2 per share (US$2.27 per share) for 2014, which is subject to approval at the Annual General Meeting to be held on Apr 29, 2015. If approved, this dividend will be paid on May 6 to the shareholders of record as on May 5.
Combined with the previously paid interim dividend of €1 per share (US$1.25 per share), the company’s total dividend for 2014 comes to €3 per share (US$3.52 per share), reflecting 46% growth in EUR (26% growth in USD) from 2013.
Additionally, this Boston Beer Inc. (SAM) peer approved a share repurchase program worth $1 billion for 2015.
Outlook
In 2015, AB InBev expects industry volumes to improve in the U.S., Mexico, Brazil and China. On a constant geographic basis, the company’s organic 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 $4.3 billion in 2015, mainly directed toward investments in its consumer and commercial initiatives, and capacity expansion.
Other Stocks to Consider
AB InBev currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the beverages-alcohol industry include Constellation Brands Inc. (STZ) and SABMiller plc (SBMRY), both carrying a Zacks Rank #2 (Buy).
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