Which beer stock is a better buy?
Based in Leuven, Belgium, Anheuser-Busch InBev SA / NV (BUD) produces, distributes and sells beer, other alcoholic beverages and non-alcoholic beverages worldwide. It offers a portfolio of around 500 beer brands, including Budweiser, Corona and Stella Artois. Based in Sao Paulo, Brazil, Ambev SA (ABEV) produces, distributes and sells beer, draft beer, carbonated soft drinks, other non-alcoholic drinks, malt and food products. Its segments include Brazil; Central America and the Caribbean; Latin America South; and Canadian.
The beer industry suffered a setback amid the COVID-19 pandemic as retail beer sales fell because stadiums, concert halls, bars and restaurants were closed or operated at capacity limited. However, according to a study by the Beer Institute, the majority of Americans beer consumption remained unchanged in the midst of the pandemic. Beer consumption is expected to increase in the coming months with the reopening of bars and restaurants and growing demand for new flavors. Thus, we believe that ABEV and BUD should benefit from growing demand this summer.
ABEV gained 32.4% over the past year, while BUD gained 31%. Additionally, ABEV’s 38.3% gain over the past nine months is significantly higher than BUD’s 21.2% returns. Moreover, in terms of performance over the past three months, ABEV is the clear winner with gains of 23.1% against BUD’s 6.7% returns.
But which of these two titles is the best buy now? Let’s find out.
BUD and Panay Films announced on March 15, 2021 the upcoming release of their dynamic new talk show, “Not A Sports Show”. Known for its brands’ award-winning advertising campaigns, BUD’s work with Panay Films to establish itself in mainstream programming marks a shift for the company as it continues to reinvent the way it presents itself in the marketplace.
ABEV management said on May 6 that “Ambev delivered a strong business performance in the first quarter, driven by a coherent strategy in which innovation, flexibility and operational excellence continue to be key pillars. We were better prepared to deal with some persistent headwinds from COVID-19 than in March 2020, and these results give us reason to be confident that our strategy is working. “
Recent financial results
BUD’s revenue increased 17.2% year-on-year to $ 12.29 billion for its fiscal first quarter ended March 31, 2021. The company’s EBITDA increased 14.2% in year on year to reach $ 4.27 billion. Its profit was $ 1.01 billion from a loss of $ 845 million during the period last year. In addition, his EPS was $ 0.51 compared to a loss of $ 0.42 per share in the prior year period.
ABEV’s net sales increased 32% year-on-year to 16.65 billion reais ($ 3.25 billion) for its first fiscal quarter ended March 31, 2021. The company’s EBITDA increased 25.9% year-on-year to 5.33 billion reais ($ 1.04 billion). Its profit rose 124.9% year-on-year to 2.76 billion reais ($ 538.79 million), while its EPS stood at 0.17 reais ($ 0.03), in up 139.6% year-on-year.
Past and expected financial performance
BUD’s revenue has grown at a CAGR of 2.5% over the past five years. Analysts expect BUD’s revenue to grow 12.6% in its 2021 fiscal year and 5.1% in 2022. The company’s EPS is expected to rise 17.9% in 2022.
By comparison, ABEV’s revenue has grown at a CAGR of 5.6% over the past five years. The company’s revenue is expected to grow 16.5% in fiscal 2021 and 6% in fiscal 2022. Its EPS is expected to increase 15.4% in 2022.
BUD’s turnover for the last 12 months is 4.34 times that of ABEV. However, ABEV is more profitable, with a net margin of 20.69% versus 8.82% for BUD.
ABEV DEER and ROTC of 17.02% and 11.25%, respectively, are higher than BUD’s 0.18% and 4.26%.
In terms of non-GAAP forward P / E, ABEV is currently trading at 27.61x, which is 20.9% higher than BUD’s 22.84x. However, BUD’s 12.69x forward non-GAAP PEG ratio is 200% higher than ABEV’s 4.23x.
BUD and ABEV both have an overall C rating, which equates to Neutral in our proprietary POWR rating system. POWR scores are calculated taking into account 118 different factors, each factor being weighted to an optimal degree.
BUD and ABEV both have B ratings for sentiment, which is in line with favorable sentiment from analysts.
However, BUD and ABEV both have a C rating for Momentum. This is justified given BUD’s 6.7% gains over the past three months and 12% loss over the past month, and ABEV’s 23.1% returns over the past three months. and the loss of 9.4% over the past month.
BUD has a C rating for the stock, in line with its non-GAAP futures P / E of 22.84x, which is 12% above the industry average 20.40x. ABEV also has a C rating for the stock, which is in line with its non-GAAP futures P / E of 26.05x, which is 27.7% above the industry average 20.40x.
Of the 37 stocks in the beverage industry, BUD is ranked No.14, while ABEV is No.11.
Beyond what I stated above, we also rated both stocks for stability, growth, and quality. Click here to view all BUD assessments. Get all ABEV ratings here.
Beer sales are expected to increase in the post-pandemic era with the reopening of bars and restaurants. However, while BUD and ABEV may be considered good long-term investments given their dominance in the global market, it may not be the right time to invest in either of the above. these two stocks given their weaker financial situation than that of the industry.
Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. See all of the top rated stocks in the beverage industry here
BUD shares were trading at $ 68.67 per share on Thursday afternoon, down $ 0.82 (-1.18%). Year-to-date, BUD is down -1.16%, compared to a 17.02% increase in the benchmark S&P 500 over the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s a passionate interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach he takes while advising investors in his articles. After…