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On Wednesday, Berenberg Bank initiated coverage on Anheuser-Busch InBev (EBR:ABI:BB) (NYSE: BUD), the world’s largest brewer with a market capitalization of $122 billion, with a Buy rating and a price target set at EUR72.00. The firm’s analysts highlighted the company’s shift towards the sales of ready-to-drink (RTD) beverages and hard seltzers, which have a different margin structure compared to traditional beer products. According to InvestingPro data, the company maintains impressive gross profit margins of 55.25%, demonstrating strong pricing power in its core markets.
Anheuser-Busch InBev’s current focus on RTDs and hard seltzers, which are closer to soft drinks in terms of margins, introduces a higher level of operating leverage and volatility. This necessitates a greater risk premium and warrants a lower valuation multiple to reflect the potential risks associated with operating at these lower margin levels. The company currently trades at a P/E ratio of 21.17x, which InvestingPro analysis suggests is relatively high compared to near-term earnings growth prospects.
Despite these challenges, Berenberg noted Anheuser-Busch InBev’s strong return on invested capital (ROIC) history, attributing it to the company’s strategy of prioritizing organic growth and its limited number of acquisitions over the past ten years. This approach has underpinned the company’s financial performance and is a positive aspect for the brewer’s outlook. Recent data shows a ROIC of 7%, and notably, the company has achieved a perfect Piotroski Score of 9, indicating excellent financial strength.
To establish the EUR72.00 price target, Berenberg used a target FY26E enterprise value to earnings before interest and taxes (EV/EBIT) multiple of 13.0x. This is a 35% discount to Boston Beer (NYSE:SAM) Company’s 20-year historical average multiple of 20x. Berenberg’s valuation reflects a reassessment of the business’s nature and the heightened operational risks that have emerged from the company’s strategic shift.
Anheuser-Busch InBev’s stock will be monitored for market reactions to this new coverage and price target as investors and the market digest Berenberg’s analysis and its implications for the company’s future financial performance.
In other recent news, Anheuser-Busch InBev’s financial performance has drawn significant attention. The company reported a stronger-than-expected performance for fiscal 2024, with an EBITDA margin improvement to 36% and discretionary cash flows of $7.6 billion, which helped reduce its debt to EBITDA ratio to 2.9x. S&P Global Ratings has revised its outlook on Anheuser-Busch InBev to positive, citing the company’s strong cash flow generation and debt reduction efforts. Deutsche Bank (ETR:DBKGn) upgraded Anheuser-Busch’s stock rating from Hold to Buy, increasing the price target to €75.00, highlighting the company’s resilience and digital leadership.
Additionally, TD Cowen raised its price target for Anheuser-Busch to $62, maintaining a Hold rating, acknowledging the company’s organic sales growth and market share gains in the U.S. Evercore ISI retained an Outperform rating with a $75 target, noting improvements in U.S. beer volumes and market share gains. Anheuser-Busch’s annual report for 2024, filed with the SEC, did not disclose specific financial figures but is expected to be scrutinized for insights into the company’s strategic direction and market performance. These developments highlight Anheuser-Busch’s ongoing efforts to strengthen its financial position and market presence.
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