What’s Next For Anheuser-Busch InBev (BUD) Stock After A 7% Fall This Year Despite Q4 Earnings Beat?

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Anheuser-Busch InBev

Anheuser-Busch InBev stock (NYSE: BUD) recently reported its Q4 results, with revenues falling short but earnings beating the street estimates. The company reported revenue of $14.5 billion and an adjusted profit of $0.82 per share compared to the consensus estimates of $15.3 billion and $0.76, respectively. BUD stock has declined around 7% this year, and we think that it now has some room for growth. In this note, we discuss Anheuser-Busch InBev’s stock performance, key takeaways from its recent results, and valuation.

BUD stock has seen a decline of 15% from levels of $70 in early January 2021 to around $60 now, vs. an increase of about 35% for the S&P 500 over this roughly three-year period. However, the decrease in BUD stock has been far from consistent. Returns for the stock were -13% in 2021, -1% in 2022, and 8% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BUD underperformed the S&P in 2021 and 2023.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Staples sector including PG, COST, and KO, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BUD face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery? From a valuation perspective, BUD stock looks like it has room for some growth. We estimate Anheuser-Busch InBev’s valuation to be $67 per share, reflecting over 10% upside from its current levels of $60. Our forecast is based on a 19x P/E multiple for BUD and expected earnings of $3.48 on a per-share and adjusted basis for the full year 2024. The 19x P/E multiple aligns with the average value for the stock over the last three years.

Anheuser-Busch InBev’s revenues increased 3% to $59.4 billion in 2023, led by pricing gains, while volume was down 1.7%. Looking at segments, South America led the sales growth, with segment revenue up 27% on an organic basis. Most of the volume decline was visible in North America, with a 12.1% fall. This can be attributed to lower Bud Light sales. The company faced backlash after it decided to feature Bud Light in a social media promotion by a transgender influencer, Dylan Mulvaney, in April 2023. This was followed by calls for a boycott of Bud Light by some influential voices. Following the boycott, the company decided to put two of its executives on leave of absence.

Anheuser-Busch InBev’s EBITDA margin contracted by 23 bps to 33.6% in 2023. The bottom line of $3.05 on an adjusted basis was marginally higher than $3.03 the company reported in 2022. Looking forward, the company expects its EBITDA to grow between 4% and 8% in 2024. Anheuser-Busch InBev will likely continue to benefit from pricing actions and premiumization, aiding its sales growth.

While BUD stock looks like it can see higher levels, it is helpful to see how Anheuser-Busch InBev peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Returns Mar 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 BUD Return 0% -7% -43%
 S&P 500 Return 1% 8% 129%
 Trefis Reinforced Value Portfolio 0% 5% 643%

[1] Returns as of 3/4/2024
[2] Cumulative total returns since the end of 2016

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