Anheuser-Busch InBev May Need Another Quarter to Confirm Buy Signal

If the company maintains its pricing power, BUD stock could be a smart buy

Stocks continue to move back and forth, making the short-term outlook for stock buying a little uncertain. And calling a bottom or top is always a fool’s errand. Many investors could even use a drink or two. Nevertheless, now is the time for investors to build their watchlists. And if they do, Anheuser-Busch InBev (NYSE:BUD) has qualities that investors will be looking for when buyers return to the market. – MarketBeat

First the bad news. In what becomes a pattern, BUD stock fell nearly 10% despite the company beating both the top and bottom of the line. The reason seems to be that the company’s guidance was as expected. And for many analysts, expectation is not good enough. Especially when there is enough uncertainty about the broader economy to leave investors questioning how much value they should ‘expect’ to place.

However, reading management’s comments on the company’s earnings call hints that BUD stocks may reward patient, opportunistic investors.

Consumers are willing to pay more

Anheuser-Busch InBev is classified as a “sin stock” because of its focus on alcoholic beverages. These stocks ultimately perform well in all economic conditions. The basic idea is that although consumers will cut back on certain items during periods of economic hardship, they will usually still buy alcohol.

But quality remains important. After all, there is a lot of competition in this space. And the prevalence of local, artisanal drinks is only increasing. However, this is a time when size matters. Not only is Anheuser-Busch better able to manage its own internal costs, it is also able to pass those costs on to its consumers.

And that certainly turns out to be the case. The company reported a slight decline in beer volume for the quarter (3% vs. 4%). However, citing “ruthless execution,” the company managed to keep its margins high in the face of rising wage, transportation and aluminum costs.

Expanding its premium product base

I will always believe that Anheuser-Busch has a great catalyst in being the official beer sponsor of the National Football League (NFL). The league continues to grow in popularity and Bud Light has become a ubiquitous logo at every NFL event.

But the company is expanding into other areas. Many millennial and Gen-Z consumers say no to beer and yes to seltzers, hard ciders, teas, or juices. Anheuser-Busch continues to expand into these areas. And one reason they can do this is because of the strength of their legacy brands. In addition, the company continues to build its digital platform, which helps to boost sales and margins.

Analysts remain bullish on BUD stocks

Despite the recent decline in the company’s stock, analysts still give BUD stock a price target of $71.17 for 12 months. That is an attractive rate of increase of 28% compared to the current level. However, analysts currently rate the stock as a Hold. And that’s probably because they want to see another quarter or two of earnings reports to confirm sales are still strong.

The April CPI report gives some indication that sales may at least remain constant. Consumers are not yet giving up their spending. And if they do, it’s likely that other industries (I think airlines and hotels) will feel it first. But even with that said, it means investors may not see the stock price grow for a few quarters.

And with that in mind, there is no reason for you to buy BUD stock just yet. There are other dividend stocks that are better. However, it is one to watch

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