Anheuser-Busch InBev SA (NYSE: BUD ) , Molson Coors Brewing Company (NYSE: TAP ) , and The Boston Beer Company (NYSE: SAM ) are three large brewers. All three companies have reported earnings this quarter, with each report telling a very different story. Let's break down each report and determine which company is the best investment opportunity going forward.
The beer giants
Anheuser-Busch InBev SA, or A-B InBev for short, is the largest brewer in the world. It has more than 200 brands of beers, and 14 of them provide sales of more than $1 billion each; these include Budweiser, Bud Light, Stella Artois, Michelob Ultra, and Beck's. It holds the No. 1 or No. 2 market position in 19 countries, including an incredible 47.6% share of the United States' beer market.
Molson Coors is the company behind several powerhouse beer brands, including Coors Light, Blue Moon, Molson Canadian, Carling, and Keystone Light. The company says its continued success is due to its love of beer, a passion for building the best brands, and a dedication to innovation, all while operating its business responsibly.
Boston Beer helped drive the American craft beer revolution with its Samuel Adams Boston Lager leading the way. Today, the company brews over 50 styles of beer, which the company tends to release seasonally. Boston Beer was founded just 29 years ago in 1984, but its constant innovation and dedication to the craft has resulted in the company becoming one of the most-loved brewers in the world.
On Oct. 31, A-B InBev released third-quarter results. The reported earnings per share exceeded analyst expectations, but revenue came in lighter than expected. Here's a summary of the results and a year-over-year comparison:
|Earnings Per Share||$1.36||$1.32|
|Revenue||$11.73 billion||$12.00 billion|
- Earnings per share grew 17.2%
- Revenue increased 3%
- Gross profit rose 6% to $6.97 billion
- Gross margin expanded 171 basis points to 59.4%
- Total volume declined 1.3%
Third-quarter results were released on Nov. 6 and the numbers were mixed compared to analyst expectations. Here's a breakdown of the report and a year-over-year comparison:
|Earnings Per Share||$1.45||$1.39|
|Revenue||$1.17 billion||$1.21 billion|
- Earnings per share grew 5.8%
- Revenue increased 2%
- Gross profit fell 1.4% to $501.2 million
- Gross margin expanded 26 basis points to 42.79%
- Total volume decreased 0.9%
On Oct. 30, Boston Beer released its third-quarter report and the results exceeded expectations on both the top and bottom lines. Here's an overview of the report and a year-over-year comparison:
|Earnings Per Share||$1.89||$1.82|
|Revenue||$216.40 million||$200.42 million|
- Earnings per share grew 19.1%
- Revenue increased 28.5%
- Gross profit rose 23.7% to $115.38 million
- Gross margin declined 300 basis points to 53%
- Total core shipment volume rose 29%
An earnings report tells a great story about what happened over the last three months, but the conference call that follows provides the story that matters. A conference call can offer a forum for management to gloat or brag about a successful quarter, or one in which they can try to calm investors or make excuses for what went wrong. Let's take a look at the two most notable comments made by each management team regarding the quarter and anything that may be happening to drive sales higher:
"The volumes of our global brands -- Budweiser, Corona, Stella Artois and Beck's -- grew collectively by 5%... Global Budweiser led the way, up 8.1% in the quarter and 7.5% year-to-date, led by strong performances in China, Brazil and the U.K. Corona grew by 3.7% due to the strong performances in Mexico and the brand's main export market outside the U.S. We continue to see tremendous growth opportunity and potential for Corona." Carlos Alves de Brito, CEO
"[W]e're now 8 months away from the start of the 2014 FIFA World Cup, an event that's sure to bring tremendous excitement to Brazil with lots of new beer drinking occasions. Our programs are locked and loaded." Carlos Alves de Brito, CEO
"Our innovation pipeline is delivering a mid-single-digit percent of sales and our owned above-premium brand portfolio is growing at a double-digit rate globally." David Dunnewald, VP of Global Investor Relations
"Across our markets, we continue to see weak consumer demand and shifts in consumer preferences that will impact our business for some time. In that environment, however, we will accelerate our commitment to transformational efforts to grow our brands and make Molson Coors more competitive and to drive total shareholder return going forward." David Dunnewald, VP of Global Investor Relations
"I am particularly pleased with the growth in the quarter of our flagship, Sam Adams Boston Lager, which will be celebrating its 30th anniversary in 2014 and then in our fall seasonal Sam Adams OctoberFest. Our fall seasonal program also included the limited release of some excellent beers, including Sam Adams Harvest Pumpkin and an innovative small batch brew, Samuel Adams Fat Jack Double Pumpkin Ale. We remain confident about the long-term outlook for the craft category and our Sam Adams brands." Jim Koch, Founder & Chairman
"Certainly as we plan our brand activities and our retail execution activities, for 2014, we intend to incorporate the 30th anniversary of Jim founding the company and brewing Boston Lager into that..." Martin Roper, President & CEO
And the winner is...
When factoring in recent earnings and comments made by management about the future, our winner is The Boston Beer Co. A-B InBev came in a close second, but Boston Beer is currently about 12% below its 52-week high and has very favorable forward estimates. Molson Coors takes last in this three-way match-up due to the downbeat comment regarding weaker consumer demand that is expected to impact its business for "some time."
The Foolish bottom line
Anheuser-Busch InBev, Molson Coors, and Boston Beer all have the potential to outperform the overall market in 2014, but I believe Boston Beer has the most upside. The beer market has faced a weak consumer atmosphere, but I do not think this will last much longer. Keep a close eye on all three of these and consider buying them on any heavy weakness provided by the market.
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