Anheuser-Busch InBev NV (ADR) (BUD)’s Big Revenue Beat

Competing Brewers

SABMiller is one of Anheuser-Busch InBev NV (ADR) (NYSE:BUD)’s largest competitors, and released its full-year 2013 results towards the end of May. The report showed fairly strong growth for the company, with group revenue growth of 10% and adjusted EPS up 11% for the year. The group is also reliant on its developing markets of Africa, Latin America and Asia Pacific to sustain growth, and seems to be doing a good job in Asia especially, with a huge surge in volume. While the 2013 results were encouraging, the company’s 3-5 year expected growth rate of around 14% is below that of Anheuser-Busch InBev NV (ADR) (NYSE:BUD).

Heineken, AB InBev’s Dutch rival, has also increasingly turned to emerging markets to fuel growth, although they didn’t have a particularly good first quarter. Revenue declined 2.7% on an organic basis, with organic volume down the same amount. The consolidation of Asian Pacific Breweries has been going as planned however, with low double-digit volume and revenue growth. For the report, the company tempered its expectations for full-year 2013, but still expects to grow volume and revenue.

Valuations and Metrics

Anheuser-Busch InBev NV (ADR) (NYSE:BUD) isn’t a particularly cheap stock at the moment, and looks more or less fairly valued at a P/E of 21 times trailing earnings versus SABMiller’s 24.54 and Heineken’s very low 10.74. The company’s operating margin of around 32% is strong compared to the industry average, and the return on equity of 18.44% is quite good. The company does have a fair bit of debt on the books, with a total debt to equity ratio of 97.58 and $13.88 billion in cash.

The Bottom Line

Anheuser-Busch InBev NV (ADR) (NYSE:BUD) had a good second quarter. While earnings missed the target, revenue came in well above the consensus, which sent the stock up following the report. With strong growth in Asia, especially China, the company seems well positioned to keep up this solid volume and revenue growth throughout the rest of year. On the other hand, the valuation seems fair at the moment, and patient investors may be best off waiting for a correction.

The article BUD’s Big Revenue Beat originally appeared on Fool.com and is written by Daniel James.

Daniel James has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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