Why Did BUD Stock Fall 8%?

Anheuser-Busch InBev stock (NYSE: BUD) recently reported its Q3 results, with revenues falling short but earnings exceeding the street estimates. The company reported revenue of $15.05 billion and an adjusted profit of $0.98 per share, compared to the consensus estimates of $15.57 billion and $0.89, respectively. Despite an earnings beat, BUD stock declined around 8% post the results announcement, as the company saw a surprising dip in volume.

Anheuser-Busch InBev’s revenues of $15.05 billion in Q3 reflected a 2.1% y-o-y growth. Looking at segments, North America revenue was up 1.5%, Middle Americas up 1.9%, South America up 5.6%, EMEA gained 8.2%, while Asia Pacific was down 9.5%. The overall volume declined by 2.4%, led by Asia Pacific, down 9.5%. The decline in volume was surprising, given the consensus estimates were for marginal growth. The company attributed this decline to soft consumer demand in China and Argentina. Anheuser-Busch InBev saw its EBITDA margin improve 110 bps to 36.0% in Q3. The bottom line of $0.98 reflected a 14% y-o-y growth.

Looking at BUD stock, the decline in volume didn’t sit well with the investors, evident from an 8% drop post results announcement. We estimate Anheuser-Busch InBev’s valuation to be $68 per share, reflecting around 15% upside from its current levels of $59. Our forecast is based on a 20x P/E multiple for BUD and expected earnings of $3.32 on a per-share and adjusted basis for the full year 2024. The 20x figure aligns with the stock average P/E ratio over the last three years. However, if the volume decline were to continue over the coming quarters, it may warrant a decline in valuation multiple for BUD.

BUD stock, down 9% this year, has underperformed the broader markets, with the S&P 500 index rising 20%. Looking at a slightly longer period, the change in BUD stock over the recent years has been far from consistent, although annual returns were considerably less volatile than the S&P 500. Returns for BUD stock were -13% in 2021, -1% in 2022, and 8% in 2023. Notably, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While BUD stock looks like it can see higher levels, it is helpful to see how Anheuser-Busch InBev peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 11/5/2024
[2] Cumulative total returns since the end of 2016

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