Anheuser-Busch InBev’s Stock Lost >23% Value In Last 6 Months; What Is The Stock Actually Worth?

by Trefis Team
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Anheuser-Busch InBev
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Anheuser-Busch InBev (NYSE: BUD) has seen its stock price drop by over 23% over the last 6 months, to $74.80 as of February 7, 2020. A major part of the drop began post the announcement of the company’s Q3 2019 results, which saw a major drop in beer volume sold in China. Subsequently, the consensus for the company’s top line has been lowered for the full 2019 as well as 2020. However, the company’s margins are expected to rise due to its successful deleveraging program and SABMiller synergy benefits. Improving profitability is likely to support growth in the company’s stock price, with revenue also expected to see an uptick 2020 onward. Trefis has a price estimate of $97 per share for Anheuser-Busch InBev’s stock, which reflects an upside of close to 30% from its current level of $74.80.

You can view the Trefis interactive dashboard – Anheuser-Busch InBev Valuation: Expensive or Cheap? – to understand the various factors driving a higher stock price estimate for the company, where you can alter the key assumptions and arrive at your own stock price estimate for BUD’s stock.

A] Estimating Revenue Growth

  • Full year revenue is expected to decrease marginally from $54.6 billion in 2018 to $53.3 billion in 2019, followed by an increase to $54.7 billion in 2020. Higher revenue in 2020 would mainly be driven by the company’s focus on and initiatives to double the sales of its premium brands in the near future.
  • North America revenue is expected to add about $0.3 billion over 2019 and 2020, driven by increasing market share and premiumization. Additionally, the above core portfolio and value brands have seen strong growth.
  • Latin American region is likely to see marginal decline in revenue by 2020, driven by lower volumes in Argentina with the on-going economic challenges and weak demand conditions along with shift in consumer mix, partially offset by rising market share of Corona and Victoria, rising sales of newly launched two new beer brands – Nossa and Magnifica, and increasing market share of Patagonia.
  • Lower revenue in the EMEA (Europe, Middle East & Africa) region in 2019 could mainly reflect the impact of deconsolidation of Coca-Cola Beverages Africa (CCBA) and lower beer sales. Thereafter, healthy organic growth coupled with the introduction of a new brewery in Nigeria is expected to drive growth.
  • Lower revenue in Asia-Pacific in 2019 to be driven by decreasing volume sales in China. Healthy organic growth is expected in 2020, led by increasing premiumization and strong overall performance of the company’s e-commerce business.

To understand how each operating division has performed over recent years and what is the outlook, view our interactive dashboard on Anheuser-Busch InBev Revenues.

B] Estimating Net Income

  • Net Income grew from $4.9 billion in 2016 to $8 billion in 2017 due to one-time tax benefits realized with the implementation of the TCJ Act and synergy benefits, before falling to $6.8 billion in 2018 due to higher marketing expenses. We expect net income to be around $8.8 billion in 2019 and 2020.
  • Net income margin is expected to increase from 12.4% in 2018 to approximately 16.5% in 2019, 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.
  • Higher commodity costs and currency headwinds, along with higher marketing spending to push its new offerings, are expected to lead to marginal decline in margins in 2020.

C] Estimating Earnings Per Share

  • EPS has grown from $2.83 in 2016 to $4.04 in 2017 due to tax benefits received, followed by a decline to $3.44 in 2018 due to lower net income. We estimate EPS to be $4.45 in 2019 and $4.43 in 2020.
  • EPS rise in 2019 can be attributed to higher Net Income and stable share count. EPS to remain flat in 2020.

D] Share Price Estimation

  • As per Anheuser-Busch InBev Valuation by Trefis, we have a price estimate of $97 per share for the company’s stock.
  • The stock price estimate is arrived at by using the discounted cash flow valuation technique which you can find in BUD’s detailed financial model here.
  • Based on projected EPS of $4.43 per share and a stock price estimate of $97 per share, BUD’s forward price-to-earnings (P/E) multiple stands at 21.9x

To understand how BUD’s P/E multiple over the years stands in comparison to peers, view our interactive dashboard.

 

See all Trefis Price Estimates and Download Trefis Data here

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