Guggenheim Bullish On Budweiser Parent Company's Growth Opportunities

Beer maker Anheuser Busch Inbev NV BUD's upcoming spinoff and IPO of its Asia-Pacific business is among several positive signs that the company is set for continued growth, according to Guggenheim.

The Analyst

Laurent Grandet maintained a Buy rating on Ab InBev's stock with an unchanged $103 price target.

The Thesis

The Asia-Pacific beer market is growing at a mid-single digit organic pace and represents a "major growth opportunity" for AB InBev, Grandet said in a Thursday note. (See his track record here.)

The pending IPO of Budweiser Brewing Company APAC should result in $9 to $11 billion in proceeds that can be used to repay debt and/or bring the company's leverage ratio below management's 4x target ahead of schedule, the analyst said. 

The beer company has a path to shift strategies from defensive to offensive with a revamped focus on premium brands, Grandet said. Some of the brands involved include Michelob Pure Gold, Stella Artois, craft brands and the expansion of "Beyond Beer," he said. 

South of the border in Mexico, AB InBev could see an incremental three points of annualized growth once the company has full distribution at OXXO, the largest chain of convenience stores in Latin America, in 2022, the analyst said.

Sentiment is showing signs of improvement in Brazil after the company showed "strong" double-digit volume growth there in the first quarter, Grandet said. 

Multiple growth catalysts should help the company continue reducing debt over the coming years while maintaining its annual dividend and holding off on share repurchases through at least 2020, according to Guggenheim. 

Price Action

Shares of Anheuser Busch Inbev were trading lower by 1.72% at $89.87 at the time of publication Thursday. 

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