Ambev - Growth & Income

Ambev (ABV) recently delivered another solid quarter. The company once again recorded double-digit sales growth due to strong volume gains in several markets, particularly in the booming market of Brazil.

Estimates continue to rise as analysts expect continued growth in the company's Latin American markets. It is a Zacks #2 Rank (Buy) stock.

Third Quarter Results

Ambev reported its results for the third quarter on November 3. Earnings per share came in at $1.77, 15 cents ahead the Zacks Consensus Estimate.

Net sales increased by 13% year-over-year. This was driven by an 8.1% increase in total volumes, including 12.0% growth in Brazil. Volume was down 5.4% in Canada, however.

Meanwhile the gross margin was essentially flat. Operating income improved 12% year-over-year.

Outlook

Estimates have been rising since the company reported its solid third quarter. The Zacks Consensus Estimate for 2010 is $6.79, up from $6.61 30 days ago. This represents an impressive 31% increase over 2009 EPS.

The 2011 estimate is currently $7.57, up from $7.46 30 days ago. This equates to 12% annual EPS growth.

Fundamentals

Ambev offers an attractive dividend yield of 2.0%. Its payout ratio is a healthy 45%.

Shares trade at 22x trailing earnings, a premium to the industry average of 18.0x. Its PEG ratio is a respectable 1.7.

Return on equity is 30.8%, more than double the industry average of 14.8%.

Read the October 20 article here.

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Todd Bunton is the Growth & Income strategist for Zacks.com

 
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