On Tuesday, JPMorgan reiterated its Overweight rating and EUR75.00 price target on Anheuser-Busch InBev (EBR:ABI:BB) (NYSE: BUD), expressing confidence in the company's potential for a top line recovery and cash return upside. According to InvestingPro data, the stock is currently trading near its 52-week low of $45.94, potentially offering an attractive entry point for investors.
The company has maintained dividend payments for 24 consecutive years, demonstrating consistent shareholder returns. The firm highlighted Anheuser-Busch InBev's improved execution and focus on organic performance, which is expected to drive a consistent delivery on its 4-8% organic EBITDA growth target, with an estimated 7% compound annual growth rate from 2023 to 2028.
Anheuser-Busch InBev is anticipated to achieve like-for-like sales growth of approximately 4.5% in fiscal years 2025 and 2026. This growth is supported by strong price/mix resilience, while volumes are projected to return to 0-1% growth as the company regains market share in a global beer market expanding at about 0.3%. The forecast for fiscal year 2025 points to a volume recovery with additional upside potential from markets such as China and Argentina.
The company is poised to post its first rise in gross margin and EBITDA margins since 2018 in fiscal year 2024. JPMorgan sees a significant margin upside of around 500 basis points in the medium term, which could drive both earnings per share growth and free cash flow levels exceeding $9 billion, equating to an estimated 10% free cash flow yield for fiscal year 2025. InvestingPro data shows the company already maintains impressive gross margins of 54.92% and generated $9.97 billion in levered free cash flow over the last twelve months. The total cash return is expected to double from 2024 to approximately $8-9 billion per annum.
Anheuser-Busch InBev's valuation is considered compelling by JPMorgan, trading at 12.4 times the projected 2025 earnings per share and 7.6 times enterprise value/EBITDA, both at a 15-20% discount to European Beverages.
Current InvestingPro analysis suggests the stock is undervalued, with additional metrics and insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this prominent beverage industry player. The company's current P/E ratio stands at 14.93, with a market capitalization of $95.65 billion. The firm predicts a total shareholder return for fiscal year 2025 of 12%, compared to 10% for the rest of the European staples sector.
While the first quarter of 2025 may continue to see volume pressure, JPMorgan suggests investors look forward to the bounce from the second quarter of 2025, along with the structural growth and cash return opportunities.
In other recent news, Anheuser-Busch InBev, the world's largest brewer, reported a mixed third-quarter performance, with earnings per share of $0.98 surpassing the FactSet consensus of $0.90. However, the company's organic growth for the quarter reached only 2.1%, falling short of expectations. As a result, Anheuser-Busch adjusted its EBITDA forecast to a growth range of 6-8% and announced a $2 billion share buyback program.
Despite these developments, Bernstein and TD Cowen revised their price targets for Anheuser-Busch, with Bernstein decreasing the price target from $78.00 to $73.00 while maintaining an Outperform rating, and TD Cowen reducing it to €60.00. Bank of America also issued a cautionary note, highlighting a potential downside risk for Anheuser-Busch shares.
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