Anheuser-Busch Is A Better Company Now Than It Was 12 Months Ago

Goldman Sachs reinstated coverage of Anheuser Busch Inbev SA (ADR) (NYSE: BUD) at Buy, as it believes the shares will likely see a 19 percent upside to its 12-month price target. The firm is of the view that the company appears to be a better business now than it was 12 months ago.

3Q Earnings: Next Catalyst

Analyst Mitch Collett sees the upcoming third quarter earnings release on October 28 as a catalyst. The analyst believes the focus will be on any additional disclosure surrounding the acquired assets and the timing of synergies. The analyst expects year-over-year organic revenue growth of 3.2 percent and organic EBITDA growth of 4.3 percent. Synergy delivery should provide further catalysts throughout 2017–2019, the analyst said.

Related Link: The Anheuser-Busch/SABMiller Deal Is "Transformational" For Molson Coors

Goldman believes the acquisition of SABMiller improves AB Inbev's ability to grow, increases its market share and end-market concentration, and diversifies its revenues.

Synergy Achievable, Another Mega Deal?

The firm is of the view that synergy targets are achievable, helping to drive CAGRs of 9 percent in EBITDA and 13 percent in EPS over 2017–2019. The firm expects the company to acquire again in 2020 — a $80 billion deal that could add 8 percent to 2020 earnings per share estimate. With a free cash flow yield of 5 percent estimated for 2017 compared to 4.4 percent for European staples, Goldman believes the company is compelling for a business that has doubled every four years.

In pre-market trading, the shares of AB Inbev were down 0.28 percent at $126.90, but had rebounded at last check to $127.67.

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