Anheuser-Busch Expects Margin Improvement

Bud Light's parent company, Anheuser-Busch InBev, is expected to see an improvement in margins, according to BofA Securities. Analyst Andrea Pistacchi has upgraded shares of Anheuser-Busch to Buy from Neutral and raised her target stock price to €65 ($68.93) from €50.80, indicating a 29% increase from Thursday's closing price of the company's American depositary receipts (ticker: BUD).

In a research note on Friday, Pistacchi stated, "ABI's margins are at an inflection point as cost of goods sold (COGS) pressures have started to ease, >$1bn profit hit from Bud Light is in the base, and a higher cost of doing business, which has weighed on margins in recent years, is now largely in the base too."

This optimistic outlook follows a decline of 11% in the stock price of Anheuser-Busch in 2023. The brand faced a consumer boycott due to its marketing partnership with a transgender social-media influencer.

The impact of this boycott was evident in Anheuser Busch's second-quarter financial results, released in August. While revenue in the US declined by 10.5% due to decreased sales of Bud Light, the company's profit for the quarter exceeded expectations, thanks to positive performances in other countries.

Pistacchi believes that Anheuser-Busch is well-positioned to capitalize on its strong market positions, particularly in Latin America, and achieve better profit growth in the future. She noted that despite the uncertain global economic and consumer backdrop, the company's exposure to Latin America (which accounts for almost 60% of group EBTDA) is favorable, as economists forecast only a slight slowdown in private consumption in the region. However, she acknowledged the challenging outlook for US sales volume.

In early trading on Friday, shares of Anheuser Busch rose by 3.6% to $55.48.