On Monday, Morgan Stanley maintained a positive outlook on Anheuser-Busch InBev (NYSE:BUD), adjusting the stock's price target slightly to $73.50, up from the previous target of $73.00, while keeping an Overweight rating on the shares. The adjustment comes as the firm revises its estimates to factor in the latest foreign exchange rates, scanner data, and insights from the company's management.
The firm has revised its forecast for the company's organic sales growth (OSG) for the fiscal year 2024, lowering it from 4.2% to 3.7%, citing a more challenging industry environment in the United States. Despite this, Morgan Stanley anticipates that Anheuser-Busch InBev will outperform its own guidance for organic EBITDA growth, which is set at 4-8%. This prediction is supported by the company's strong performance in the first half of the year, where it achieved a 7.8% increase in organic EBITDA, and is expected to benefit from a more favorable comparison in the second half.
The firm also expects the company's profit growth to be more pronounced in the fourth quarter, as marketing expenditures, including sponsorship of high-profile events such as the Olympics, Copa America, and the UEFA European Championships, are concentrated in the summer months. For the third quarter, Morgan Stanley forecasts a 3.6% increase in organic sales growth and a 9% rise in organic EBITDA growth, with an acceleration expected in the fourth quarter leading to a full-year growth of 10.3%, a slight decrease from the previously projected 10.7%.
Morgan Stanley's updated valuation of Anheuser-Busch InBev reflects the new estimates and the impact of recent movements in foreign exchange rates. The firm's analysis indicates a continued confidence in the company's ability to achieve robust profit growth despite a more challenging U.S. market.
In other recent news, AB InBev reported a strong second quarter for 2024, marked by a significant 55% increase in the gross merchandising value of non-ABI products, reaching $530 million. The company's EBITDA rose by 10.2% with margin expansion in all regions, while the underlying EPS increased by 25%. Revenue growth was also notable, with a 2.7% increase, and a 3.6% rise in revenue per hectoliter.
AB InBev's megabrands were key drivers of these market share gains. Despite facing some regional challenges and macroeconomic headwinds, the company remains confident in its future growth opportunities and long-term value creation. The company also actively managed its bond portfolio, with bonds worth $3 billion maturing by 2026.
InvestingPro Insights
Complementing Morgan Stanley's positive outlook on Anheuser-Busch InBev (NYSE:BUD), recent data from InvestingPro provides additional context to the company's financial position. As of the last twelve months ending Q2 2024, BUD reported a robust revenue of $59.93 billion, with an impressive gross profit margin of 54.48%. This aligns with one of the InvestingPro Tips highlighting BUD's "impressive gross profit margins," underscoring the company's operational efficiency.
Despite the challenges in the U.S. market noted by Morgan Stanley, BUD's financial health appears solid. The company maintains a market capitalization of $130.37 billion and a P/E ratio of 22.45, suggesting investor confidence in its future earnings potential. Additionally, an InvestingPro Tip reveals that BUD "has maintained dividend payments for 24 consecutive years," which may appeal to income-focused investors.
It's worth noting that while Morgan Stanley projects strong profit growth, particularly in Q4, investors should also consider that "3 analysts have revised their earnings downwards for the upcoming period," according to another InvestingPro Tip. This contrasting view highlights the importance of comprehensive analysis when evaluating BUD's prospects.
For readers seeking a more in-depth analysis, InvestingPro offers 7 additional tips on BUD, providing a broader perspective on the company's financial health and market position.
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