Premiumization And Beyond Beer Expansion Will Drive A Strong Long-Term Upside Narrative

Catalysts

About Anheuser-Busch InBev

Anheuser-Busch InBev is a global brewer that builds leading beer and Beyond Beer brands and increasingly monetizes a large digital and distribution ecosystem.

What are the underlying business or industry changes driving this perspective?

• Scaling premium, non alcohol and Beyond Beer portfolios such as Michelob Ultra, Corona Zero and Cutwater, which grow faster than the core category and carry higher price points, is set to lift consolidated revenue growth and structurally improve net margins.
• Digital platforms like BEES and direct to consumer channels are deepening data driven revenue management and upselling across millions of small retailers, which should support steady revenue per hectoliter expansion and operating leverage in EBITDA.
• Reallocation of resources toward high growth developing markets and renewed execution in China, combined with long term category growth in emerging economies, positions the company to return to positive volume growth and accelerate earnings over time.
• Category leadership in no and low alcohol beers and new consumption occasions, including streaming and major global sports events such as the FIFA World Cup and UEFA competitions, should increase brand power and advertising efficiency, supporting both top line growth and marketing margin productivity.
• Rapidly growing adjacencies in energy drinks and flavored or mixed beverages, built on existing distribution and brand building capabilities, expand the addressable market beyond traditional beer and have the potential to deliver higher revenue density and margin accretion as they scale.

Assumptions

This narrative explores a more optimistic perspective on Anheuser-Busch InBev compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Anheuser-Busch InBev's revenue will grow by 6.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 10.4% today to 15.4% in 3 years time.
• The bullish analysts expect earnings to reach $10.9 billion (and earnings per share of $6.3) by about December 2028, up from $6.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $9.7 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.3x on those 2028 earnings, down from 20.4x today. This future PE is lower than the current PE for the GB Beverage industry at 21.0x.
• The bullish analysts expect the number of shares outstanding to decline by 1.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.16%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Structural softness in the global beer category, with peer expectations of roughly 1% volume growth and AB InBev already experiencing below potential volumes in 2025, could mean long term demand growth is weaker than assumed, limiting the company’s ability to grow revenue and earnings as projected.
• Persistent macro and weather related headwinds in key Latin American markets, where beer is structurally more important to consumer baskets and recent volumes have been hit by inflation, low consumer sentiment and unseasonable weather, could make earnings more cyclical than expected and compress revenue and EBITDA margins over time.
• Underperformance and execution challenges in China, including a 15.2% revenue decline, channel mix shifts away from AB InBev’s strength and ongoing inventory right sizing, may signal a longer lasting loss of share in an important growth market, which would weigh on long term revenue growth and constrain margin expansion.
• Reliance on premiumization, pricing and Beyond Beer expansion to offset weak core volumes, in an environment where inflation is normalizing and affordability is a key concern, may cap future price increases and slow mix benefits, putting structural pressure on revenue per hectoliter, gross margin and ultimately net margins.
• Greater capital returns through a $6 billion share buyback and higher dividends, combined with continued exposure to FX and commodity volatility and the need for sustained brand and digital investment, could reduce balance sheet flexibility and raise the risk that future shocks or slower growth translate into lower free cash flow and earnings growth than anticipated.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Anheuser-Busch InBev is €83.85, which represents up to two standard deviations above the consensus price target of €67.35. This valuation is based on what can be assumed as the expectations of Anheuser-Busch InBev's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €93.14, and the most bearish reporting a price target of just €54.85.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $70.9 billion, earnings will come to $10.9 billion, and it would be trading on a PE ratio of 20.3x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of €54.12, the analyst price target of €83.85 is 35.5% 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.