Headquartered in Leuven, Belgium, Anheuser-Busch InBev SA/NV (BUD) produces, distributes, and sells beer, other alcoholic beverages, and soft drinks worldwide. It offers a portfolio of roughly 500 beer brands that include Budweiser, Corona, and Stella Artois. Based in Sao Paulo, Brazil, Ambev S.A. (ABEV) produces, distributes, and sells beer, draft beer, carbonated soft drinks, other non-alcoholic beverages, malt, and food products. Its segments include Brazil; Central America and the Caribbean; Latin America South; and Canada.
The beer industry suffered a setback amid the COVID-19 pandemic as retail beer sales plummeted because stadiums, concert venues, bars and restaurants were closed or operated at limited capacity. However, according to a study by The Beer Institute, the majority of Americans’ beer consumption remained unchanged amid the pandemic. Beer consumption is expected to increase in the coming months with the reopening of bars and restaurants and an increasing demand for new flavors. So, we think both ABEV and BUD should benefit from increasing demand this summer.
ABEV has gained 32.4% over the past year, while BUD returned 31%. Also, ABEV’s 38.3% gain over the past nine months is significantly higher than BUD’s 21.2% returns. Furthermore, in terms of their past three months’ performance, ABEV is the clear winner with 23.1% gains versus BUD’s 6.7% returns.
But which of these two stocks is a better buy now? Let’s find out.
BUD and Panay Films announced on March 15, 2021, the coming release of their dynamic new talk show—“Not A Sports Show.” Known for its brands’ award-winning advertising campaigns, BUD’s work with Panay Films to push into mainstream programming marks a shift for the company as it continues to reinvent the way it presents itself to the market.
ABEV’s management said on May 6 that “Ambev delivered a solid commercial performance in the first quarter, driven by a consistent strategy in which innovation, flexibility and operational excellence continued to be key pillars. We were better prepared to tackle some persisting COVID-19 headwinds than we were in March 2020, and these results give us reasons to be confident that our strategy is working.”
Recent Financial Results
BUD’s revenue increased 17.2% year-over-year to $12.29 billion for its fiscal first quarter, ended March 31, 2021. The company’s EBITDA grew 14.2% year-over-year to $4.27 billion. Its profit came in at $1.01 billion compared to a $845 million loss in the year-ago period. Also, its EPS was $0.51 compared to a $0.42 loss per share in the prior-year period.
ABEV’s net revenue increased 32% year-over-year to R$16.65 billion ($3.25 billion) for its fiscal first quarter, ended March 31, 2021. The company’s EBITDA grew 25.9% year-over-year to R$5.33 billion ($1.04 billion). Its profit increased 124.9% year-over-year to R$2.76 billion ($538.79 million), while its EPS came in at R$0.17 ($0.03), up 139.6% year-over-year.
Past and Expected Financial Performance
BUD’s revenue grew at a 2.5% CAGR over the past five years. Analysts expect BUD’s revenue to increase 12.6% in its fiscal year 2021 and 5.1% in 2022. The company’s EPS is expected to grow 17.9% in 2022.
In comparison , ABEV’s revenue has grown at a 5.6% CAGR over the past five years. The company’s revenue is expected to increase 16.5% in its fiscal year 2021 and 6% in fiscal 2022. Its EPS is expected to grow 15.4% in 2022.
BUD’s trailing-12-month revenue is 4.34 times ABEV’s. However, ABEV is more profitable, with a 20.69% net income margin compared to BUD’s 8.82%.
ABEV’s ROE and ROTC of 17.02% and 11.25%, respectively, are higher than BUD’s 0.18% and 4.26%.
In terms of forward non-GAAP P/E, ABEV is currently trading at 27.61x, which is 20.9% higher than BUD’s 22.84x. However, BUD’s 12.69x forward non-GAAP PEG ratio is 200% higher than ABEV’s 4.23x.
Both BUD and ABEV have an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Both BUD and ABEV have a B grade for Sentiment, which is in sync with favorable analysts’ sentiment.
However, both BUD and ABEV have a C grade for Momentum. This is justified given BUD’s 6.7% gains over the past three months and 12% loss over the past month, and ABEV’s 23.1% returns over the past three months and 9.4% loss over the past month.
BUD has a C grade for Value, consistent with its 22.84x forward non-GAAP P/E, which is 12% higher than the 20.40x industry average. ABEV also has a C grade for Value, which is in sync with its 26.05x forward non-GAAP P/E, which is 27.7% higher than the 20.40x industry average.
Of the 37 stocks in the Beverages industry, BUD is ranked #14, while ABEV is ranked #11.
Beer sales are expected to increase in the post-pandemic era as bars and restaurants reopen. However, even though both BUD and ABEV can be considered good long-term investments considering their global market dominance, this is perhaps not the right time to invest in either of these two stocks given their weaker-than-industry financials.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Beverage industry here
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BUD shares were trading at $68.67 per share on Thursday afternoon, down $0.82 (-1.18%). Year-to-date, BUD has declined -1.16%, versus a 17.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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