What To Expect From Anheuser-Busch InBev’s Q2 2019 Earnings Report?

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Anheuser-Busch InBev

Anheuser-Busch InBev (NYSE: BUD) is set to release its Q2 2019 financial results on July 25, 2019, followed by a conference call with analysts.

Key Expectations

  • Anheuser-Busch InBev revenues have witnessed a lot of volatility over recent quarters due to fluctuation in performance across different geographies, effect of divestitures and acquisitions, and premiumization.
  • In spite of a healthy organic growth, we expect BUD’s total revenues to decline by over 2% y-o-y in Q2 2019, driven by lower sales in Latin America, along with the impact of deconsolidation of Coca-Cola Beverages Africa (CCBA) in the EMEA (Europe, Middle East and Africa) region, partially offset by increased premiumization initiatives from the management and strong sales in China.
  • Adjusted earnings are expected to come in flat at $1.10 per share in Q2 2019 (similar to year-ago levels), driven by benefits from the sale of premium brands, synergies from SABMiller acquisition, and deleveraging effect, offset by foreign currency headwinds.

You can view our interactive dashboard – Anheuser-Busch InBev Earnings: Performance and 2019 Forecast – and alter the assumptions to arrive at your own estimate for the company’s revenues, earnings and stock price. In addition, here is more Consumer Staples data.

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A Quick Look At BUD’s Key Revenue Sources

BUD reported $54.62 billion in Total Revenues in Fiscal 2018. This included 4 primary revenue streams:

  • Latin America: $21.85 billion in FY 2018 (40% of total revenue). This includes sales of BUD’s local and international beer brands in Colombia, Honduras, Mexico, Peru, Cuba, Brazil, Argentina, and many other countries spread across Latin America North, South, and West.
  • North America: $15.92 billion in FY 2018 (29% of total revenue). This division includes BUD’s U.S. and Canada businesses. In addition, it also includes the Global Export and Holding Companies business, which includes the company’s headquarters and countries in which products are sold only on an export basis, where Anheuser doesn’t have any operations or production activities.
  • EMEA (Europe, Middle-East and Africa): $8.37 billion in FY 2018 (15% of total revenue). This includes sale of global and local beer brands in UK, Ireland, France, Italy, Spain, Russia, and export activities in Europe and the Middle East.
  • Asia-Pacific: $8.47 billion in FY 2018 (16% of total revenue). This includes BUD’s business in Australia, China, India, Japan, New Zealand, South Korea, Vietnam, and other South and Southeast Asian countries.

A] Revenue Trend

Latin America

  • Revenues are expected to remain lower in Q2 2019, driven by a weak demand condition due to shifting consumer mix and the challenging macro-economic situation in Argentina and Peru.
  • This is likely to be partially offset by rising market share of Corona and Victoria along with new initiatives in the beer category which continue to gain share.

North America

  • Segment revenue is expected to increase in Q2 2019 driven by increasing market share and premiumization.
  • BUD’s above core portfolio has gained market share, led by Michelob Ultra, Bon & Viv Spiked Seltzer, and other innovations in the segment.
  • Though the mainstream segment has faced pressure, there is continuous improvement in performance of value brands led by the Natural family, while Budweiser and Bud Light share trends remain unchanged.

EMEA

  • In spite of healthy organic growth coupled with the introduction of a new brewery in Nigeria, segment revenue is expected to decline in Q2 2019 mainly due to deconsolidation of Coca-Cola Beverages Africa (CCBA) and lower beer sales.

Asia-Pacific

  • The region is expected to report healthy organic growth led by increasing premiumization and strong overall performance of the company’s e-commerce business.
  • However, currency headwinds would likely affect segment revenue in Q2 2019.

B] Expenses and Profitability

  • Total expenses are expected to decline due to lower interest outgo and tax expense, partially offset by foreign currency losses.
  • BUD is expected to report a flat net finance income/loss in Q2 2019 compared to Q2 2018, driven by mark-to-market gains related to the hedging of its share-based payment programs, and lower interest outgo due to deleveraging program, offset by forex losses.
  • Effective tax rate is expected to be lower in Q2 2019 on the back of large non-deductible mark-to-market losses that were present in the year-ago period.
  • Net income margin in Q2 2019 is expected to remain almost stable as the previous-year period, driven by decline in total revenue as well as expense levels.

Full Year Outlook

  • Full year revenue is expected to increase marginally from $54.62 billion in 2018 to $54.64 billion in 2019, followed by a further growth of 3.4% to $56.5 billion in 2020.
  • Higher revenue would mainly be driven by the company’s focus on and initiatives to double the sales of its premium brands in the near future.
  • Net income margin is expected to increase from 12.4% in 2018 to approximately 16.8% in 2019 and further to 17% in 2020, driven by synergies from acquisition ($150 million remaining to be achieved in 2019) and lower interest expense due to BUD’s focus on deleveraging.
  • New bond issuance of $15.5 billion in February 2019, to pay off its existing higher interest debt, is expected to contribute to growth in the company’s bottom line.

According to Anheuser-Busch InBev Valuation done by Trefis, we have a price estimate of $90 per share for BUD’s stock.

 

 

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