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Why Ambev SA Stock Dropped Today

By Steve Symington - May 18, 2017 at 1:29PM

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Shares of the Latin American brewing giant fell along with the rest of Brazil's stock market today. Here's what happened.

What happened

Shares of Ambev SA ( ABEV -2.48% ) were down 11.1% as of 12:15 p.m. EDT on Thursday as investors in the Brazilian brewing giant weighed the effects of a growing corruption scandal surrounding the country's president.

So what

Ambev certainly wasn't alone in its drop. Brazil's Bovespa stock market index is down 9.4% as of this writing following reports that President Michel Temer gave permission to try to bribe a witness to remain silent in an ongoing graft investigation. At least two Brazilian MPs have already filed requests for impeachment proceedings against Temer, leaving investors to worry over the fate of his pro-business plans for economic reform.

Beers lined up in various glasses


Now what

Before today's drop, Ambev stock had climbed nearly 9% this month on the heels of its strong first-quarter 2017 earnings report. Quarterly revenue climbed 8% year over year with growth in all geographies, while earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 7.6% as solid growth in Latin America South, Canada, and Central America was held back by consumer market headwinds in Brazil.

Suffice it to say, then, that investors are rightly concerned that Ambev will suffer if those headwinds intensify given Brazil's political turmoil.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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