This Stock’s For You!

With shares of Anheuser-Busch (NYSE:BUD) trading at around $89.21 is BUD an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Anheuser-Busch is best known for its Budweiser, Becks, Bud Light and Michelob brands, but it’s about to add Corona to the list. Considering Corona is the fourth most profitable beer in the world, this will expand an already successful empire.

Anheuser-Busch has a solid footing in Latin America, and owning Corona will do wonders in that regard. Currently, Anheuser-Busch only has 15 percent total sales in Europe. Europe is far from a consumer wonderland at the moment, but we are talking about beer here. If there’s a way for Anheuser-Busch to expand in Europe, they will figure it out. This isn’t an attempt at selling future potential for Anheuser-Busch. This prognostication is simply based on past performance. This company has been steadily growing global market share for years.

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Anheuser-Busch has also embarked on a massive cost-cutting campaign. This might dilute the number of quality employees, but it will also improve the bottom line. There is potential for this to have a negative impact on long-term results. Time will tell. At the moment, investors certainly aren’t complaining.

Anheuser-Busch has seen a 20 percent increase in sales YoY for the past four years. This trend is likely to continue. There is a one percent yield whereas competitor Boston Beer (NYSE:SAM) doesn’t offer any yield. On the other hand, Molson Coors Brewing Company (NYSE:TAP) offers a more impressive three percent yield. The good news is that Anheuser-Busch is expected to increase its dividend in the future, but you shouldn’t expect it to come anywhere near three percent.

Let’s take a look at some important numbers. This will help determine if Anheuser-Busch is a good investment going forward.

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Anheuser-Busch is normal. However, it’s not as impressive as the debt-to-equity ratio for its competitors. The balance sheet is also the weakest of the three listed below.

Debt-To-Equity

Cash

Long-Term Debt

BUD

.96

$3.79 Billion

$39.84 Billion

TAP

.57

$585.70 Million

$4.70 Billion

SAM

.00

$62.84 Million

$0

 

T = Technicals on the Stock Chart Are Strong

Anheuser-Busch has performed extremely well over the past three years. There aren’t many stocks out there that are up over 70 percent over the past three years and pay a dividend.

1 Month

Year-To-Date

1 Year

3 Year

BUD

6.64%

47.86%

52.03%

77.50%

TAP

6.24%

2.78%

8.10%

4.82%

SAM

.15%

4.09%

8.69%

167.90%

 

At 88.21, Anhesuer-Busch is currently trading above all its averages.

50-Day SMA

85.93

100-Day SMA

84.28

200-Day SMA

77.88

 

E = Earnings Are Strong and Revenue Is Consistent

Anheuser-Busch has shown steady improvement through the years in regards to both earnings and revenue.

2007

2008

2009

2010

2011

Revenue ($)in billions

19.78

23.69

36.76

36.30

39.05

Diluted EPS ($)

N/A

1.93

2.90

2.50

3.63

 

Quarterly earnings and revenue also show steady improvements, which is exactly what you want to see as an investor.

9/2011

12/2011

3/2012

6/2012

9/2012

Revenue ($)in billions

10.22

9.87

9.33

9.87

10.27

Diluted EPS ($)

1.00

1.16

1.06

1.23

1.15

 

T = Trends Support the Industry

Regardless of the overall economic atmosphere, people will drink beer. It’s that simple. This is especially true in the United States. And if you’re going to invest in a company that sells beer, then why not go with the most trusted name?

Conclusion

Anheuser-Busch might not be loved by its employees right now considering cost-cutting measures. This is understandable and definitely unfortunate. However, the focus here is to look at the company from an investing standpoint. That being the case, cost-cutting is a positive. Other positives include a Forward P/E of 17.13, double digit margins, an expected increase in yield and relentless expansion and stealing of market share. What more could you possible ask for as an investor? The balance sheet is perhaps the only negative, but very few stories are perfect.

Based on all factors, Anheuser-Busch is an OUTPERFORM.

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