On Monday, Jefferies maintained a positive stance on shares of Anheuser-Busch InBev (ABI:BB) (NYSE:BUD), reiterating a Buy rating and a price target of €70.00. The firm expressed confidence in the brewer's future, noting improved clarity on its growth trajectory after a period marked by significant market fluctuations.
The outlook for Anheuser-Busch InBev has become more optimistic as the company demonstrates stronger execution and potential for margin recovery. With 2024 anticipated to be the first "normal" year since the pandemic began in 2019, and with cost pressures expected to ease, Jefferies anticipates a more visible framework for mid-single-digit (MSD) sales growth and high-single-digit (HSD) EBITDA growth.
Jefferies highlighted the consistency in Anheuser-Busch InBev's performance and the prospect of increased cash returns as key drivers for a potential double-digit total shareholder return (TSR) and a market re-rating.
The firm's analysis suggests that Anheuser-Busch InBev's calendar year 2025 price-to-earnings ratio stands at 15.2x, in contrast to the staples sector average of 17.9x. This comparison underscores the perceived undervaluation of the company's shares relative to the broader sector.
Anheuser-Busch InBev's stock performance and investor sentiment in the coming months will likely be influenced by the company's ability to deliver on these expectations and demonstrate sustained growth and profitability in a post-pandemic market environment.
In other recent news, Anheuser-Busch InBev reported a promising start to 2024, with a 6.7% increase in net revenue and a 5.4% growth in earnings before interest, taxes, depreciation, and amortization (EBITDA).
The company's digital initiatives have generated $465 million in gross merchandising value of non-API products in the first quarter. Anheuser-Busch has also completed a $1 billion share buyback program, with an additional $200 million executed in direct share buybacks.
In other developments, UBS upgraded Anheuser-Busch's stock from Neutral to Buy and raised the price target to EUR72.00, reflecting the firm's anticipation of an improvement in the company's performance across several key metrics.
UBS outlined potential upside risks to Anheuser-Busch's margins and free cash flow for the fiscal years 2024 and 2025, predicting more than a 7% increase in margins and a 16% rise in free cash flow.
These recent developments seem to indicate a positive trajectory for Anheuser-Busch. However, the company is facing challenges in the Chinese market due to weather and macroeconomic conditions. Despite these challenges, Anheuser-Busch remains confident in its long-term market potential.
InvestingPro Insights
As Anheuser-Busch InBev (NYSE:BUD) navigates through a post-pandemic market, current InvestingPro data underscores key financial metrics that align with Jefferies' optimistic outlook. The company's market capitalization stands at a robust $118.53 billion, reflecting investor confidence. Notably, BUD has maintained an impressive gross profit margin of 53.89% over the last twelve months as of Q1 2023, reinforcing its strong position in the Beverages industry and supporting the potential for margin recovery mentioned by Jefferies.
The stock's P/E ratio, adjusted for the last twelve months as of Q1 2023, is 21.87, which is below the sector average, indicating that the company could be undervalued as suggested. Furthermore, the consistency in Anheuser-Busch InBev's performance is exemplified by its ability to maintain dividend payments for 24 consecutive years, with a notable dividend growth of 64.95% over the last twelve months as of Q1 2023, which could be attractive to income-focused investors.
For those considering a deeper dive into Anheuser-Busch InBev's financial health, InvestingPro offers additional insights. There are 6 more InvestingPro Tips available, including the fact that analysts predict the company will be profitable this year and the RSI suggesting the stock is currently in oversold territory.
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