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On Monday, Evercore ISI increased its price target on Anheuser-Busch InBev (NYSE:BUD) shares, raising it from $75.00 to $80.00, while maintaining an Outperform rating on the stock. The revision follows Anheuser-Busch’s first-quarter performance, which showcased organic EBITDA growth surpassing expectations at 7.9%, compared to the anticipated 3.1%. The company’s strong performance is reflected in its impressive year-to-date return of 36%, with the stock currently trading near its 52-week high of $67.55.
The company’s consistent delivery of organic EBITDA growth within its medium-term outlook of 4-8% was highlighted, marking the 14th consecutive quarter of achieving this target. Evercore ISI noted Anheuser-Busch’s positive momentum and market share gains, particularly in the United States, where the firm is experiencing a significant turning point with considerable growth potential. According to InvestingPro data, the company maintains robust gross profit margins of 56% and has achieved a "GOOD" financial health score, indicating strong operational efficiency.
Anheuser-Busch’s strategic focus on premium brands like Mich Ultra, and to a lesser extent, Cutwater and NUTRL, has been identified as a key driver behind the company’s momentum. This approach contrasts with previous concerns that the Bud Light brand might lead to a decline in the U.S. market. The company’s global strategy of promoting five relevant megabrands in each market, which are believed to carry over 30% higher margins than local core brands, has also been effective, with the company gaining or maintaining market share in 60% of its markets.
The analyst’s commentary emphasized Anheuser-Busch’s attractive valuation, suggesting significant upside potential for the stock. The company’s improving sales and strengthening balance sheet are expected to support further share buybacks and debt reduction. With the ability to repurchase 3% of its stock annually at the current valuation, Evercore ISI forecasts a local currency EPS growth of over 10%, aligning with global industry leaders. InvestingPro analysis indicates the stock is currently undervalued, trading at a P/E ratio of 19.3x with a market capitalization of $131 billion. For deeper insights into BUD’s valuation and growth potential, check out the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Despite acknowledging higher macroeconomic and foreign exchange risks associated with Anheuser-Busch, Evercore ISI believes that the stock’s current discount is not justified. The $80 price target is deemed conservative by the firm, implying a forward FY26 EV/EBITDA multiple of approximately 11 times and a free cash flow yield of around 6%.
In other recent news, Anheuser-Busch InBev has reported its annual results for the fiscal year ending December 31, 2024, though specific financial figures were not disclosed in the SEC filing. S&P Global Ratings revised its outlook on Anheuser-Busch InBev to positive, citing strong free cash flow generation and a reduced debt to EBITDA ratio of 2.9x, which was better than expected. Deutsche Bank (ETR:DBKGn) upgraded Anheuser-Busch InBev’s stock rating from Hold to Buy and increased the price target to €75.00, recognizing the company’s consistent performance and strong market position. Berenberg also initiated coverage with a Buy rating, setting a price target of EUR72.00, while noting the company’s strategic shift towards ready-to-drink beverages and hard seltzers. TD Cowen raised its price target for Anheuser-Busch InBev to $62, maintaining a Hold rating, following the company’s 3.4% organic sales growth, which exceeded expectations. Anheuser-Busch InBev’s efforts in reducing debt and improving operational efficiency have led to positive adjustments in its financial outlook. The company’s ongoing strategy and market performance continue to draw attention from analysts and investors alike.
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