Will AB InBev Show Resilience in Q3?

Alcoholic beverages have been one of the segments that has shown resilience in the face of the cost of living crisis, but will ABI's price push pay off?

Taking Advantage of The Trends

Typically, the fourth quarter outperforms for AB InBev, with increased holiday demand. And the company has maintained robust growth over the last year, with little to indicate the trend changed in the previous three months. However, net profit hasn't kept up with sales, as increased costs have buffeted the company.

To counter this, the company is working on "premiumisation", which was talked about a lot in the last earnings report. ABI is looking to capitalise on brand recognition to raise prices to support the EBITDA margin. During the third quarter, FX headwinds ate into the company's underlying profits, but that might have reversed with a weaker dollar through the end of the year.

Regional Demand in Focus

AB InBev managed revenue growth per hl of 7.8%, which wasn't keeping up with inflation for the period. Volumes grew by 3.7%, suggesting that demand remains resilient, although there has been some minor down-shifting to lower-cost brands. This could challenge the company looking to position premium brands and acquire properties with higher margins.

The focus will be on initial guidance for the new year, particularly regional demand dynamics, as the company has seen slower growth in the North American segment, providing better margins. The company is also investing substantially in reducing costs through increased digitalisation, which could get a mention in terms of being able to contribute to growing EBITDA. 

AB InBev is expected to report $0.80 on $15.3B in sales. Earnings are seen falling while sales increase, showing analysts expect the margin issue to remain at least in the short term.

AB InBev in Upward Impulse

The stock shows promising signs as it has printed both a rising pennant and a wedge within the same impulse, suggesting another leg up may be due. The measured move of $4 in range implies a target of $59 from the breakout point of $55, but using the peak at $58 is also typical instead. This provides a target of $62, which is higher than last January's high of $59. Losing $54, however, will expose lower levels. Ahead of the potential drop, there is minor support at $56.

Source: Spreadex

Key Takeaways

AB InBev has shown resilient growth this last year as alcoholic beverages have weathered the cost of living crisis. However, net profits have been lower than sales due to increased costs and FX headwinds. To counter this, ABI is working on "premiumisation" and investing in digitalisation to reduce costs. Analysts expect earnings to drop while sales increase despite dollar weakness in Q3, as the margin issue remains, and focus on how demand down-shifting may have affected the company's margins.