Anheuser Busch Inbev NV (ADR) BUD is through the worst of its operational challenges, although its valuation has taken a roller coaster ride over the last five years, according to Bernstein.
The Analyst
Bernstein analyst Trevor Stirling upgraded AB InBev from Market Perform to Outperform and upped the price target from $120.60 to $132.08.
The Thesis
AB InBev offers best-in-class earnings per share growth and "outstanding" operating return on invested capital and cash conversion, despite trading at a mere 6-percent premium to peers, Stirling said in a Monday note.
The stock deserves a 15-percent premium to its peer group, the analyst said.
The Sabmiller Ltd (ADR) SBMRY acquisition has diversified AB InBev's sources of growth, with the synergies increasing the proportion of underlying profits from high-growth emerging markets to just under 60 percent on a 2018 pro forma basis, Stirling said.
Bernstein projects five-year CAGR organic top-line growth of 5 percent; organic EBIT growth of 8 percent; EPS growth of 13 percent and total shareholder returns of 17 percent, including dividends.
These metrics can be achieved — even while assuming no improvements in the U.S. — on the basis of the embedded growth in emerging markets, along with the remaining SABMiller synergies and steady premiumization, Stirling said.
The Price Action
AB InBev shares are up about 9 percent over the past year.
The stock was up 1.48 percent after the open monday at $116.90.
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Photo courtesy of AB InBev.
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