Investment In BEES Marketplace And Mega Brands Will Drive Future Success

Key Takeaways

• Premiumization and focus on mega brands like Michelob Ultra are expected to drive revenue growth and gain market share in the U.S.
  
• Emerging market expansion and efficient digital platforms are anticipated to significantly boost revenue, earnings, and margins over the next five years.
  
• Economic volatility in emerging markets and increased competition in China pose risks to Anheuser-Busch InBev's revenue growth and long-term financial performance.

Catalysts

Produces, distributes, exports, markets, and sells beer in North America, Middle Americas, South America, Europe, the Middle East, Africa, and the Asia Pacific.

• The premiumization strategy and focus on mega brands like Michelob Ultra and Busch Light in the U.S. market are expected to drive revenue growth, as these brands have been gaining market share and showing strong volume growth.
  
• Investment in the BEES marketplace and digital platforms is anticipated to continue driving revenue growth and improve margins, as digital channels now account for 75% of revenue transactions, providing increased efficiency and direct consumer engagement.
  
• Expansion in emerging markets, which represent 10% of current volumes but are expected to drive nearly 50% of category volume growth, should lead to significant revenue and earnings growth opportunities over the next 5 years.
  
• Commitment to deleveraging and optimizing capital allocation has increased free cash flow, providing flexibility for strategic investments and potential shareholder returns, likely positively impacting EPS.
  
• Continued focus on cost efficiency, as seen with a 179 basis point improvement in EBITDA margins and disciplined CapEx spending, is expected to support higher net margins and free cash flow generation moving forward.

Anheuser-Busch InBev Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Anheuser-Busch InBev's revenue will grow by 3.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.8% today to 13.7% in 3 years time.
• Analysts expect earnings to reach $9.0 billion (and earnings per share of $4.62) by about March 2028, up from $5.9 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $8.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.7x on those 2028 earnings, down from 21.3x today. This future PE is lower than the current PE for the GB Beverage industry at 22.1x.
• Analysts expect the number of shares outstanding to decline by 1.96% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.96%, as per the Simply Wall St company report.

Anheuser-Busch InBev Future Earnings Per Share Growth

Risks

• The soft consumer environment in China and Argentina led to a total volume decline of 1.4%, posing a risk to revenue growth in those markets.
  
• Currency depreciation in Latin America may impact raw material costs, potentially affecting net margins.
  
• There is a risk of heightened competition and industry challenges in China, where AB InBev underperformed, which could impact long-term earnings in the region.
  
• High forecasted growth in emerging markets might not materialize due to economic volatility, potentially affecting revenue expectations.
  
• Future capital allocation towards share buybacks and dividends could limit available funds for necessary reinvestments, impacting long-term financial growth.

Valuation

• The analysts have a consensus price target of €66.503 for Anheuser-Busch InBev based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €75.84, and the most bearish reporting a price target of just €53.07.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $65.9 billion, earnings will come to $9.0 billion, and it would be trading on a PE ratio of 17.7x, assuming you use a discount rate of 6.0%.
• Given the current share price of €58.02, the analyst price target of €66.5 is 12.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.