Goldman Reinstates Anheuser-Busch With Buy Rating

Goldman Sachs’ Mitch Collett believes that the acquisition of SABMiller has multiple positive implications for Anheuser Busch Inbev SA (ADR) (NYSE: BUD), including improving its ability to grow, expanding its market share and end-market concentration, and diversifying its revenues.

Collett reinitiated coverage of Anheuser-Busch with a Buy rating and price target of €135.

The analyst believes the stock has 19 percent upside potential, despite the fact that it already trades at a premium to European staples.

Synergy Targets

Collett also believes Anheuser-Busch’s synergy targets are achievable and that they would drive EBITDA and EPS CAGR of 9 percent and 13 percent, respectively, through 2017–2019.

Related Link: Anheuser Busch InBev Offers "Best Of Both Words"; Morgan Stanley Resumes Coverage At Overweight

“In 2020, we expect ABI to acquire again; in our forecasts, we assume an US$80 bn deal that adds 8 percent to 2020E EPS,” the analyst mentioned.

Collett also stated that the free cash flow of 5 percent, expected for 2017, was compelling for a business that had doubled every four years.

Q3 Expectations

“ABI will report 3Q results on October 28. We believe the focus will be on any additional disclosure surrounding the acquired assets and the timing of synergies,” the analyst pointed out.

The analyst expects the company to report year on year organic revenue growth of 3.2 percent and organic EBITDA growth of 4.3 percent for the quarter.

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