Is Anheuser-Busch InBev (BUD) a Sure Thing?
Nothing like an Irish Car Bomb to start off the weekend (the cocktail that is) but sometimes I just go with a Jameson and Baileys. Order that on the rocks, and you may find a $1 charge for ice cubes on your tab. I did (and I won’t be back). But with elections coming up, I’m sure to be making the rounds…somewhere
The point is — there’s money in alcohol. Alcoholic beverages is one category beating the S&P this quarter, by almost 11 percent.
The largest brewer in the world, InBev Anheuser-Busch (InBev of Belgium acquired Anheuser-Busch in 2008), released earnings for 2Q2010 before market open today and the stock popped up on the news. Company sponsorship of the 2010 FIFA World Cup highlighted the quarter.
Here’s a quick summary:
– normalized earnings per share of 0.90 USD in 2Q10 compared to 0.72 USD in 2Q09, and 1.46 USD in HY10 compare to 1.21 USD in HY09 – beating consensus estimates of $0.8
– revenues rose 4.1 percent for the quarter or 2.8 percent on a constant geographic basis
– total volumes were up 2.1 percent, following 5.7 percent Focus Brand growth (led by Budweiser internationally, Antarctica, Brahma and Skol in Brazil and Harbin in China
– EBITDA increased 5.6 percent
– launched Bud in Russia in May 2010
– Bud Light becomes the official sponsor of the NFL in 2011
– cost of sales increased about 1 percent overall and margins showed slight decreases, but organic growth improved 50 bp in the quarter worldwide. Still, organic growth (growth from increased sales, not mergers/acquisitions) fell in North America and Central and Eastern Europe, as well as the Export/Holding Company category
Addressing the decline in growth in these segments, the company made this statement:
“Notwithstanding our international successes with Budweiser, we are not pleased with our overall market share performance, having gained or maintained share in markets representing almost half of our volumes. We are putting in place brand building and commercial programs to improve our performance in the second half of 2010 and into 2011. Importantly, our brand health indicators remain strong across all Zones. Several factors contributed to the share losses, including social actions in Belgium, tough comparisons in the United States and promotional activities by some competitors, especially in Germany.”
Anheuser Busch ADR (NYSE: BUD)
Comments: Cost-cutting measures at InBev Anheuser-Busch have resulted in stellar margins across the board. The company has met its goal of 30 percent EBITDA for the quarter. But with economies of scale largely completed and organic growth slowing in some markets, costs to increase market share and penetration in declining markets may rise. Growth elsewhere is likely to keep profits high. Plus, as one of life’s little luxuries (no cube surcharge required), the beer market is inherently stable. BUD looks like a high flyer for the near term and beyond. And in this economic environment, you might say BUD is a sure thing.
Disclosure: No positions.