Will Anheuser-Busch InBev (BUD) Stock Recover To Its 2021 Highs of $80?

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Anheuser-Busch InBev

The stock price of Anheuser-Busch InBev (NYSE: BUD) trades at $60 per share, about 25% below its peak level of around $80 seen in mid-June 2021. In contrast, its peer Diageo stock (NYSE: DEO) saw a 35% decline over this period. BUD stock was trading at $55 in early June 2022, just before the Fed started increasing rates, and is now 8% above that level, compared to a substantial 45% gain for the S&P 500 during this period. In this analysis of Anheuser-Busch InBev, we capture trends in the company’s stock during the turbulent market conditions seen over 2022. We compare these trends to the stock’s performance during the 2008 recession.

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 WMT, PG, and COST, 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.

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 ample room for growth. We estimate Anheuser-Busch InBev’s valuation to be $72 per share, reflecting over 20% upside from its current levels of $60. Our forecast is based on a 21x P/E multiple for BUD and expected earnings of $3.44 on a per-share and adjusted basis for the full year 2024. The 21x P/E multiple is slightly higher than the 20x average over the last three years.

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2022 Inflation Shock
Timeline of Inflation Shock So Far:

  • 2020 – early 2021: Increase in money supply to cushion the impact of lockdowns led to high demand for goods; producers unable to match up.
  • Early 2021: Shipping snarls and worker shortages from the coronavirus pandemic continue to hurt supply.
  • April 2021: Inflation rates cross 4% and increase rapidly.
  • Early 2022: Energy and food prices spike due to the Russian invasion of Ukraine. Fed begins its rate hike process.
  • June 2022: Inflation levels peak at 9% – the highest level in 40 years. The S&P 500 index declined more than 20% from peak levels.
  • July – September 2022: Fed hikes interest rates aggressively – resulting in an initial recovery in the S&P 500 followed by another sharp decline.
  • October 2022 – July 2023: Fed continues rate hike process; improving market sentiments helps S&P500 recoup some of its losses.
  • Since August 2023: Fed has kept interest rates unchanged to quell fears of a recession, and it is prepared for rate cuts in 2024 and 2025.

In contrast, here’s how BUD stock and the broader market performed during the 2007/2008 crisis.

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

Anheuser-Busch InBev and S&P 500 Performance During 2007-08 Crisis

In November 2008, Anheuser-Busch was acquired by the Belgian-Brazilian brewing company InBev, making the combined entity the largest brewing company in the world. At that point, the listing was moved to Brussels for around ten months, before moving back to NYSE in early August 2009. BUD stock rose from $40 in early August 2009 to around $53 in early 2010, reflecting a 32% rise between August 2009 and January 2010. The S&P 500 Index saw a decline of 51%, falling from levels of 1,540 in September 2007 (pre-crisis peak) to 757 in March 2009 (as the markets bottomed out). It then rallied 48% between March 2009 and January 2010 to reach levels of 1,124.

Anheuser-Busch InBev Fundamentals And Financial Position

Anheuser-Busch InBev’s revenue has risen from $54.3 billion in 2021 to $59.4 billion in 2023. This can partly be attributed to a rebound in consumer demand post-pandemic and the company’s focus on premiumization. However, the company saw its North America revenue decline by 12% y-o-y in 2023, amid 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.

Although the company saw its sales rise in the last three years, its operating margin has declined from 25.5% in 2021 to 23.5% in 2023. Still, lower finance costs and taxes helped its reported bottom line expand from $2.28 to $2.91 over this period.

Anheuser-Busch InBev’s total debt declined from $89 billion in 2021 to $78 billion in 2023, while its cash decreased from $12 billion to $10 billion over the same period. The company’s debt is around 66% of the company’s equity and its cash is around 5% of its assets, implying not a comfortable debt position.

Conclusion
The potential upside could be 35% if the stock recovers from $60 currently to its pre-shock levels of $80. With the Fed’s efforts to tame runaway inflation rates helping market sentiments, we think BUD stock will likely see higher levels over time. High inflation and a weak consumer spending environment are likely to weigh on Anheuser-Busch InBev’s near-term performance. However, as the inflation eases, it is likely that the company will see a rebound in its volumes for key markets, boding well for its stock. We think that investors will likely be better off picking BUD stock in the current dip for robust gains in the long term.

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 Jun 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 BUD Return -6% -8% -44%
 S&P 500 Return 4% 15% 144%
 Trefis Reinforced Value Portfolio 2% 6% 656%

[1] Returns as of 6/27/2024
[2] Cumulative total returns since the end of 2016

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