A vigorous day for trading spilled over to the world’s largest brewing companies.
Denver’s Molson Coors Brewing Co. (TAP, Financial) closed with a gain of more than 0.50% to $61.39 a share. It was a nice change after shares took a double-digit dive last week when the company released earnings showing U.S. sales dropped almost 6%.
Heineken NV (XAMS:HEIA, Financial), also up 0.07%, stood at nearly 88 euros ($104.88). The market has been widely generous to the stock of the Netherlands-based brewer, up 23% over the last three years.
Thursday’s laggard was the world’s largest brewer, Anheuser-Busch InBev (BUD, Financial), down more than 2% to under $96 a share, on the heels of the company’s release of first-quarter earnings. Wednesday’s announcement confirmed an industry-wide trend of a decline in U.S. beer sales. Anheuser-Busch and Molson have been hurting as their core demographic shifts to a broad array of craft beers and other beverages.
Meanwhile, a number of guru investors, including Wallace Weitz (Trades, Portfolio) and  Jeff Auxier (Trades, Portfolio), have high expectations for both brewers, especially AB InBev, which is headquartered in Belgium. In 2016, the company purchased SABMiller, creating the largest brewer in the world. The combined company was to appeal to investors who wanted stable, cash generative consumer staples companies. It pays a dividend of 4.52%, among the top 7% of over 300 companies that operate in the same sector.
At Molson, investors also expressed satisfaction after its union with MIllerCoors. Molson, whose shareholders have included George Soros (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio), has a cash flow that exceeds $1.2 billion.
The Peter Lynch chart also suggests it is selling below fair market value at a median of $103 a share.
The company’s average annual earnings for the last five years stand at 20%, at 7.9% over the last five years. It has $10.6 billion debt. It has a dividend yield of 2.68%. It has a market cap of $13 billion and GuruFocus ranks it 5 out of 10 in financial strength and 7 of 10 in profitability and growth.
AB InBev
America’s iconic brewers are unlocking the potential for greater profits in far-flung continents.
In the first quarter, AB InBev saw double-digit growth in its three global brands, Budweiser, Stella Artois and Corona, outside of their home markets. Budweiser declined by 1.3%, driven by declines in the U.S., but the brand grew 2.5% outside the U.S. in places like Brazil, Paraguay, India and South Korea. Stella Artois revenues grew by 12.3% with strong performances in Argentina and the United Kingdom. Corona sales grew 25% overall and 40% outside of Mexico, led by China and Western Europe.
The company reported normalized earnings before interest, taxes, depreciation and amortization of $5 billion, compared to $4.8 billion in the prior year-quarter. The EBITDA measure is used to demonstrate the company’s underlying performance. It also saw cuts in profits due to increasing freight and aluminum costs.
The company blamed colder-than-average temperatures in the U.S. to declines sales. It says sales should pick up in the second quarter in anticipation of the soccer World Cup.
Shares have fallen more than 21% since the takeover of SABMiller in October 2016. Year to date, shares are down 15%.
Financial information
AB InBev has a price-earnings ratio of 23.54, which is lower than more than half of its peers. The company has a forward price-earnings ratio of 19.19. It has a price-book ratio of 2.22. And it has a price-sales ratio of 3.36. GuruFocus ranks it 4 out of 10 in financial strength and 8 of 10 in profitability and growth.
Revenue at the end of the year was $56 billion, compared to $45.5 billion in 2016. Net income was reported as $7.99 billion last year, compared to $1.2 billion the prior year.
The company reported $114 billion in debt, which has grown exponentially over the last 15 years. It reported $49.8 billion in 2008. The prior year, it had debt of $8 billion. GuruFocus issued two warning signs that could affect profitability, including declining operating margins and asset growth that exceeds revenue growth.
In free cash flow, the company reported $10.7 billion, compared to $5 billion the prior year. It reported more than 180,000 employees in 2017.
The company has a market cap of $162 billion.
Gurus who have invested in the company include Ken Fisher (Trades, Portfolio), who holds 6.2 million shares, increasing his position in the first quarter.
Other shareholders include Jim Simons (Trades, Portfolio), Julian Robertson (Trades, Portfolio), Tom Russo (Trades, Portfolio), Weitz and Jeremy Grantham (Trades, Portfolio).
