Bullish indicating open at $55-$60, IPO prices at $37
Investing.com -- Goldman Sachs has upgraded Anheuser-Busch InBev (EBR:ABI) to “buy” from “neutral,” citing accelerating debt reduction, improving margins and volume growth outside the U.S, in a note dated Monday.
The analysts raised their 12-month price target to €78 ($88) from €62 ($70.10), reflecting higher earnings estimates and a more favorable valuation outlook.
Goldman now expects AB InBev to return to what it called “best-in-class” status among global consumer goods companies, pointing to the brewer’s strong position in emerging markets, stable top-line growth, and a premiumizing product mix led by brands like Corona and Michelob Ultra.
The brokerage forecasts 1.2% volume growth in the medium term as the drag from U.S. sales subsides and Chinese demand recovers.
Organic revenue is seen rising 4.5%, driven by pricing and favorable mix. Operating margins are also expected to improve, supported by cost efficiencies and premium products, including non-alcoholic and ready-to-drink beverages.
A key driver behind the upgrade is an expected acceleration in deleveraging. Net debt to EBITDA is projected to fall to 2.2x by 2026, from 2.9x in 2024 and 4.3x in 2019.
Goldman said the improvement will come from stronger cash generation, restrained capital spending, and a weaker dollar, which benefits both reported earnings and balance sheet metrics given the company’s large emerging-market presence and USD-denominated debt.
The bank is ahead of consensus on earnings estimates through 2027, largely due to lower expected finance costs.
Goldman said EPS growth will come more from debt reduction than from share buybacks, projecting a modest $2 billion per year in repurchases and a higher dividend payout ratio of 40%, up from 30%.
Valuation remains attractive, according to Goldman, with the stock trading at 17.6 times 2025 earnings and a 7.6% free cash flow yield.
While AB InBev shares have underperformed peers over the last decade, analysts now see upside as the balance sheet strengthens.
Risks include slower progress in deleveraging, weak trends in China, FX volatility, and an overhang from Altria’s 8% stake.
Goldman noted that Altria (NYSE:MO) recently reduced its holding and said further sales could occur, though AB InBev has previously repurchased shares from such transactions.