AB InBev (BUD) Earnings Miss Again in Q3, Ups Synergy View

World's largest brewer Anheuser-Busch InBev SA/NV 's BUD , alias AB InBev, dismal earnings trend persisted in third-quarter 2017 as the bottom line lagged estimates for the seventh straight quarter. Moreover, revenues missed estimate for the second consecutive quarter.

Despite the dismal surprise history, AB InBev's stock has improved 15.3% year to date. However, it has lagged the industry 's growth of 23.6%.

Q3 Highlights

Normalized earnings per share of $1.31 rose 57.8% from 83 cents earned in the year-ago quarter on the back of higher profits. However, earnings fell short of the Zacks Consensus Estimate of $1.50.

Anheuser-Busch Inbev SA Price, Consensus and EPS Surprise

Anheuser-Busch Inbev SA Price, Consensus and EPS Surprise | Anheuser-Busch Inbev SA Quote

Revenues advanced 32.7% to $14,740 million but missed the Zacks Consensus Estimate of $15,398 million. Further, the company registered organic revenue growth of 3.6% on the back of a 5.4% rise in revenues per hectoliter (hl) on a constant geographic basis. This improvement resulted from ongoing revenue management and premiumization initiatives that bolstered the performance of its global brands, particularly outside their home markets. Further, revenues per hl advanced 5% on a reported basis.

Consolidated revenues for the company's three global brands, namely Budweiser, Corona and Stella Artois, increased 1.6% in the reported quarter. Global brands revenues for the quarter comprised 9.6% growth at Corona and 0.9% rise in Stella Artois, partially offset by 2.2% decline at Budweiser. Growth at Corona can be attributed to 11.2% revenue growth outside Mexico, including strength in China, Colombia and Ecuador. Meanwhile, revenue growth at Stella Artois was driven by persistent strength in Argentina and Brazil. While Budweiser revenues declined year over year, it included a 4.4% growth outside the United States, led by Brazil, South Korea and Chile.

Total volumes dipped 1.2%, including a 1.5% fall in the beer volumes. Gains from volume growth in Mexico, Argentina, and Africa were more than offset by lower shipment volumes in the United States due to unfavorable weather conditions, alongside a decline in Brazil.

Cost of sales escalated 26.2% year over year to $5,546 million, while organically the same declined 1.9%. Organic cost of sales per hl fell 0.5% due to better synergies and favorable emerging market exchange rates. On a constant geographic basis, cost of sales per hl remained flat.

The company's normalized earnings before interest, taxes, depreciation and amortization (EBITDA) surged 42.2% year over year to $5,733 million, while growing 13.8% on an organic basis. This was driven by persistent synergy capture and robust top-line growth. EBITDA margin expanded 290 basis points (bps) to 31.8%, while organically, the same increased 382 bps.

Other Developments

On Oct 4, the company successfully concluded the transaction to sell its 54.5% equity stake Coca-Cola Beverages Africa (Pty) Ltd ("CCBA") to the soft-drinks giant The Coca-Cola Company (KO) for $3.15 billion. This transaction forms a part of the asset sale agreements signed for fulfilling the antitrust commitments under the SABMiller acquisition.

Agreed upon in December 2016, the deal includes the sale of CCBA's operations in South Africa, Namibia, Kenya, Uganda, Tanzania, Ethiopia, Mozambique, Ghana, Mayotte and Comoros. Formed in 2016, CCBA is the largest Coca-Cola bottler in Africa. It was founded by combining the African non-alcohol ready-to-drink bottling interests of SABMiller plc, The Coca-Cola Company and Gutsche Family Investments.

Additionally, AB InBev and Coca-Cola are in the process of finalizing a deal for to sell AB InBev's interest in bottling businesses in Zambia, Zimbabwe, Botswana, Swaziland, Lesotho, El Salvador and Honduras, to the latter. These transactions are dependent upon the receiving necessary regulatory and shareholder approvals.


Following the quarter, management reiterated previously issued outlook for 2017. As the company remains well on track with the SABMiller integration, it raised the synergy and cost savings guidance by $400 million to $3.2 billion. These synergies are expected to be realized in four years from the close of the acquisition (or by October 2020).

Owing to greater volatility in some of its core regions, AB InBev still projects revenue growth in 2017 to be backed by robust growth of global brands and strong commercial plans, including revenues management initiatives.

For 2017, AB InBev continues to anticipate cost of goods sold per hl, on a constant geographic basis, to increase in the low-single digits range, in spite of adverse currency movements and premium brands growth. Selling, general and administrative (SG&A) expenses are estimated to remain flat, driven by savings in overhead costs that will be reinvested to boost strength of its brands. Management expects normalized effective tax rate for 2017 in the range of 22-24%.

Additionally, AB InBev anticipates incurring nearly $3.7 billion as net capital expenditure for 2017. Also, the company expects dividend growth to be modest in future.

AB InBev currently carries a Zacks Rank #3 (Hold).

3 Hot Picks in the Beverage - Alcohol Space

Some better-ranked stocks in the same industry include Constellation Brands Inc. STZ , Carlsberg AS CABGY and Brown-Forman Corp. BF.B , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Brown-Forman has delivered an average positive earnings surprise of 2.7% in the last four quarters, while estimates for the current fiscal have improved in the last 30 days. Moreover, the stock has surged 23.9% in the last three months.

Carlsberg has surged 32.5% in three months. Moreover, it has a VGM Score of B.

Constellation Brands, with long-term earnings per share growth rate of 14.8%, flaunts a superb earnings surprise history. The stock has improved 38.6% in the last three months.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Brown Forman Corporation (BF.B): Free Stock Analysis Report

Constellation Brands Inc (STZ): Free Stock Analysis Report

Anheuser-Busch Inbev SA (BUD): Free Stock Analysis Report

Carlsberg AS (CABGY): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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

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

In This Story


Other Topics

Earnings Stocks

Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More