AB InBev Hits 52-Week High as World Cup Frenzy Rises - Analyst Blog

By Zacks Equity Research,

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The World Cup fever that has gripped fans across the globe is heating up the stocks of its official sponsor, Anheuser-Busch InBev SA/NV ( BUD ) or Budweiser. The shares of the world's largest brewer soared to a new high of $114.93 yesterday and closed the trading session at $114.75.

We assume that the shares are surging in anticipation of blockbuster sales during FIFA World Cup 2014, with Budweiser being the official partner of this year's greatest soccer event at Brazil. Per the restrictive official sponsorship agreement between FIFA and Anheuser-Busch InBev (alias AB InBev), the company's Budweiser and Brahma are the only beer brands to be sold at the World Cup stadiums this year.

Moreover, the rising share price depicts acknowledgement for AB InBev's recent partnership with agricultural chemicals company Syngenta AG ( SYT ) to procure high-quality malting barley, a major raw material for manufacturing beer.

Per the deal, Syngenta will provide growers with the best quality seeds of barley and assist them with tailored growing practices to improve crop production. Syngenta will not only provide training but also assist with the latest technology and expert advice from skilled agronomists on agronomy and sustainable farming techniques.

This will enable growers to augment their yields and in turn increase incomes while delivering the best quality crop to AB InBev for the production of first-rate beer that caters to exacting standards. Moreover, it will enable AB InBev to meet the growing demand for its products.

Optimism also surrounds this Zacks Rank #3 (Hold) company's last earnings release on Feb 26, wherein it posted fourth-quarter earnings per share of $1.46 that handily surpassed the Zacks Consensus Estimate of $1.29 and rose 32.7% year over year. The strong bottom-line results mainly benefited from solid revenue growth, lower cost of sales and leveraged operating expenses.

AB InBev reported organic revenue growth of 4.6% and reached $11,711 million, thereby surpassing the Zacks Consensus Estimate of $11,528 million. The year-over-year organic growth was mainly driven by an 8.4% rise in revenues per hectoliter (hl), partially offset by a 1.7% decline in total volume.

Notably, the stock price of this alcoholic beverage company rose approximately 21.9% since Feb 5, 2014. The average volume of shares traded over the last 3 months was approximately 1,091K. Moreover, the company currently trades at a forward P/E of 22.2x, higher than the industry average of 21.0x. The premium valuation is justified based on its long-term estimated earnings per share (EPS) growth rate of 8.7%.

Apart from AB InBev, its peers Brown-Forman Corporation ( BF.B ) and Constellation Brands Inc. ( STZ ) achieved new 52-week highs of $96.67 and $87.59 respectively, on Jun 19, 2014.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: EPS , SYT , STZ , BUD

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