We added Anheuser-Busch InBev to our Long Bias List. The beer industry has moved to protect margins in the wake of COGS inflation through aggressive price increases, leading to weak volume demand in 2022. Management’s price increases are offsetting the cost pressures, with some loss of volume – a tradeoff the company is used to making. The beer category is now showing signs of stabilizing volumes.
The company has reduced leverage from more than 5x at the outset of the pandemic to 4x. The EV/EBITDA multiple has not changed, making the equity more attractive. Relative to the market BUD is an outperformer in Quads 1 and 4. Its strongest absolute performance historically has been in Quad 1. More focus on international growth and a flipped Fx outlook would benefit AB InBev. We will vet whether the company can recover margins after years of contraction and enter a positive earnings revision cycle. We also refreshed our outlook for the beer sector in 2023 and BUD's prospects specifically, by examining:
- Geographic trends
- Competition with other alcoholic beverages
- The outlook for on-premise vs. off-premise
- Cost drivers
- Price increases and demand elasticity
- International growth hot spots
- And more
|
For the webcast replay and materials: CLICK HERE |
Our investment themes for the call:
