Is the Worst Finally Behind for Anheuser-Busch InBev and Big Beer Makers?

Alcoholic beverage giant Anheuser-Busch InBev S.A./N.V. (NYSE: BUD | BUD Price Prediction) reported second-quarter results Thursday morning that handily beat expectations on both the top and bottom lines. The company also said that it is just $50 million dollars away from its promised synergies of $3.2 billion related to its acquisition of SAB Miller that closed in 2018.

That $107 billion deal has hung like an albatross around AB InBev’s neck ever since it was announced in mid-2016. But with the savings on track to be realized by the end of this year and a sale of its Australian business to Japan’s Asahi for $11.3 billion, investors are beginning to pay more attention to the company’s traditional performance numbers.

One more hurdle is AB InBev’s net debt ratio, currently at 4.58 times net EBITDA with an “optimal” target of around two times, the company said it expected the ratio to drop below four times by end of next year.

Based on annual sales volume at the end of last year, AB InBev is the world’s largest seller of alcoholic beverages, with total sales of $56.4 billion. Heineken was second with sales of $24.7 billion, while Asahi ($19.4 billion), Kirin ($16.6 billion) and Diageo ($15.7 billion) rounded out the top five. Molson Coors Brewing Co. (NYSE: TAP) ranked seventh with sales of $10.9 billion. Boston Beer Co. Inc. (NYSE: SAM) posted total sales volume within a hair’s breadth of $1 billion.

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AB InBev reported the fastest beer sales growth in more than five years Thursday morning, posting a gain of 6.2% and revenue growth per hectoliter of 3.8%. Premium beers led the charge with growth of 19.5% in the quarter.

Boston Beer, brewers of Sam Adams, is expected to report earnings per share (EPS) of $1.95 and revenues of $309.77 million after markets close Thursday. Earnings are seen down slightly while the revenue forecast is up more than 13%. Though Sam Adams is no longer viewed as a craft beer, it’s close enough to one to take advantage of fast growth in the craft beer segment.

Molson Coors, which is scheduled to report results next week, is expected to post EPS of $1.66, a year-over-year decline of nearly 12%, while revenue is forecast to dip by about 2% to $3.03 billion. Shares got a boost last week when the company announced a 39% dividend hike to $0.57 per share (4.02% yield). Like AB InBev, Molson Coors is expected to continue reining in costs and reducing debt.

AB InBev shares traded up nearly 4% in the early afternoon Thursday, at $99.26 in a 52-week range of $64.55 to $102.70. The high was posted earlier Thursday morning. The stock’s 12-month consensus price target is $95.53 and its dividend yield is 2.12%.

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