Buy Anheuser-Busch For Steady, Reliable Growth
Confira nosso artigo (26/3/2015) no Seeking Alpha: Buy Anheuser-Busch For Steady, Reliable Growth
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Summary
- Anheuser-Busch, the world’s leading producer of beer, has a strong, diversified portfolio of products that makes it very dependable.
- The company is focused on organic growth and returning value to its shareholders, making it perfect for long term investors.
- I Know First is bullish on the company in the three-month and one-year time horizons.
Anheuser-Busch InBev SA/NV (NYSE: BUD) is the world’s leading beer brewer and has a portfolio of over 200 beer brands. One of the top five consumer products companies on the planet, Anheuser-Busch has six of the top ten most valuable beer brands and 16 brands each generating over $1 billion in retail sales per year. As one of the world’s strongest consumer product companies with three global beer brands, three international beer brands, and a plethora of successful local beers, the company has seen its stock price grow very steadily since 2009. This stock is a great long-term investment for investors, as the stock price will continue to steadily incline and the company is focused on returning cash to investors.
Recent News
The most recent earnings report for Anheuser-Busch was released on February 26th, where revenue was up 2.6% year over year, and the results were overall positive. Budweiser, the company’s signature brand, continued to struggle to attract younger drinkers to the beer, as craft beers have become much more popular. Chief Financial Officer Felipe Dutra acknowledged that this will not be an easy challenge for the company to overcome, and likely won’t stabilize in the short term.
But the company still saw net profit for the quarter of $2.53 billion, up from $2.52 billion a year earlier. Even as Budweiser sales continue to struggle, sales volume overall increased 0.2% in the quarter compared with a year earlier, reversing a trend of falling volumes. Organic growth in revenues stood at 5.9% for 2014, even as sales growth lagged behind. The company is committed to its premium brand of beers and is introducing new products such as ciders and its rita line to address the shifting preference of drinkers.
The recovery of the US economy and falling oil prices have also helped the company’s financial health. Lower oil prices and unemployment falling mean that consumers have more money to spend on beer in the US, and these trends are likely to continue. This should help the industry as a whole going forward, helping to soften the impact of a stronger dollar as the company increasingly becomes a non-American brand. More than 60% of Budweiser sales volume now occurs outside of the US, as efforts in the Brazilian and Chinese markets successful even through the beverage sells for a premium in foreign markets.
Stock Growth Consistency
The stock price for Anheuser-Busch has seen reliable growth over the past five years, consistently moving upwards at a steady pace. The company’s global brands, which include Budweiser, Corona, and Stella Artois, along with the other 13 brands that generate over $1 billion in sales per year, make the company extremely dependable and stable.
Figure 1. Source: Y Charts
For long-term investors, this kind of steady growth is great to have included in any portfolio, and there is no reason to believe that this growth will stop now. The decline in US volume sales looks like it is coming to an end, as sales were basically flat last quarter. While this doesn’t sound great, it is actually a good result, as the stabilized sales will allow the company to focus on other areas and new products.
Anheuser-Busch has also used M&A activities to grow its business, acquiring strong local businesses in emerging markets that already have loyal customer bases. For example, the aqcuisitions of Grupo Modelo and Oriental Brewery yielded positive results in Mexico and South Korea, respectively, last year. These acquisitions also lead to cost savings, with $730 million being saved in cost synergies because of the Grupo Modelo acquisition, and a total of $1 billion in cost savings expected by 2016.
The stock is attractive for a long-term investor because of the steady price increase, and the company’s emphasis on returning cash to shareholders only makes it more attractive. In the most recent earnings report mentioned later, the company announced that it would launch a $1 billion share buyback program in 2015, and it raised its dividend. The newest dividend announced was $3.52 a share, an increase of 26%. This dividend is likely to increase in the future, as Dutra claimed Anheuser-Busch hopes to increase its dividend yield from its current level of 2.7% to somewhere between 3% to 4%.
Analyst Opinion
With a strong fundamental analysis that portrays a reliable, steady increase in the stock price, analysts are also bullish on Anheuser-Busch. Analysts at Yahoo! Finance have a consensus recommendation of buy for the stock, with an average target price well above the level at which it is currently trading.
Figure 2: Source: Yahoo! Finance
With an average price of $137.09, the stock currently has over an 11% upside from its current trading price, which is $122.71 at this point in time. This bullish outlook for the stock makes sense considering the steady growth and strong outlook the company has looking ahead to the end of 2015.
Algorithmic Forecast
We supply financial services, mainly through stock forecasts via our predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The algorithm has more data to forecast within the long term and, naturally, outputs a more accurate predication in that time frame. Having said that, intraday traders, along with short-term players, will also benefit by taking the algorithmic perspective into consideration.
The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.
Having explained how our algorithm works, it is worthwhile to see if the algorithm agrees with the bullish fundamental analysis of the company. Figure 3 includes the three-month and one-year forecasts for Anheuser-Busch from March 22nd, 2015. In both forecasts, the company has a strong positive signal, indicating the algorithm is bullish for the stock. It also has a positive predictability indicator, meaning that the algorithm has had success predicting the behavior of company’s stock price in the past.
The strong algorithmic outlook fits with the fundamental analysis provided for the company. With an exceptionally strong portfolio of global and local brands of beer, Anheuser-Busch is a very dependable stock that investors with a long-term outlook should add to their portfolios. With the company currently focusing on organic growth and returning cash to shareholders, this is the perfect stock to add, as both the fundamental and algorithmic analyses point to steady, strong returns in the future.