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Earnings Roundup: eBay, Ford, Anheuser-Busch InBev

By Chris Hill and Maria Gallagher – Nov 5, 2021 at 4:40PM

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eBay's stock falls despite better-than-expected results in Q3.

Ford Motor Company (F -0.68%) pops on strong results and raised full-year guidance. Anheuser-Busch InBev (BUD -0.78%) surprises Wall Street with strong third-quarter profits. Motley Fool analyst Maria Gallagher analyzes those stories and declares one of the most popular Halloween candies overrated.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on Oct. 28, 2021.

Chris Hill: It's Thursday, Oct. 28. Welcome to MarketFoolery. I'm Chris Hill. With me today, Maria Gallagher. Good to see you.

Maria Gallagher: Nice to see you, too.

Hill: We've got a beverage company posting big numbers, and we have a hot automotive stock that is not named Tesla (TSLA 2.52%). But we're going to start with eBay (EBAY -1.34%). Third-quarter profits and revenue came in higher than expected for eBay, but you would not know that from what is happening with the stock because shares of eBay are down 7% this morning. Is this guidance? What's going on here?

Gallagher: They did have revenue up about 11%. Their active buyers were down now two quarters in a row, there's still 154 million. Their second quarter of GMV declined as well. Two quarters in a row of both active buyers and GMV declining and their annual active sellers is flat. Plus they had tepid guidance going into the holiday season, which is always something you want to have higher guidance for. Something that I thought was pretty interesting as I was looking through though, is that I think there's some kind of fascinating implications with authentication. They're continuing to expand that authenticity guarantee program. They are launching that with sneakers. They added 30 brands to their catalog, within sneakers. They're also doing price guidance and collection for trading cards. There have been 4 million cards purchased on or off eBay that have been added to these collections. I think that's a fascinating thing where you see companies that can maintain a specific niche can survive for quite some time. I think eBay leans into this niche of saying, really good trading cards, their sneakers are things that are rare. You have to look for them and you have to have some authentication process. I think that could be pretty interesting for them, but I'm not too surprised that the stock's down a little bit.

Hill: Obviously, we're going into an important quarter for a lot of businesses. eBay's certainly one of them. It's interesting to me that eBay currently gets, not forgotten but dismissed. There are just a lot of people in the investing community here just saying what are they really, they blew it, they had PayPal (PYPL -3.73%), they let it go. Stock's up 35% over the past year. It's a market beater over the past five years. I don't know. I've got a soft spot in my heart for eBay because it's constantly dismissed. Yet, if you're a shareholder, and you've been holding for a while, you've been rewarded by this business.

Gallagher: Yeah. I do think it's important to note, they have 154 million active buyers, even with that decline. If you compare that to, Etsy I think it's a comparison a lot of people draw. Etsy (ETSY -2.01%) has about 90 million, so it's still really massive. A lot of people still go to eBay. It's still top-of-mind for many consumers, and so I think that they have a stronger platform than I think people give them credit for.

Hill: Last thing before we move on, did they offer any guidance in terms of what they expect to be spending in terms of marketing over the next few months. My memory of 2020, when it comes to this business is eBay was spending a lot of money marketing, trying to get as many of those holiday shoppers as they could.

Gallagher: I didn't see that noted, but I wouldn't be surprised if they continue to ramp up that spend on marketing. They have been ramping up additionally, buybacks and dividends. They are trying to allocate their capital well for shareholders.

Hill: Shares of Ford Motor up nearly 10% this morning after third-quarter results were much better than expected. Ford also raised fiscal year guidance, citing strong demand. Yes, the chip shortage is still going on, but Ford says things are getting better this quarter, and they expect that improvement to improve to continue into 2022.

Gallagher: Yeah. Quarterly revenue was about 35.7 billion. They increased guidance, like you said, for the full year. They are resuming the regular dividend in quarter four, which is really exciting for them. They were talking about, they have high demand for new products with their EVs, their earnings power in North America. What I think is really interesting is, you see a pretty strong concentration with sales in the U.S. They have market share in North America at about 11.2%. It goes down to about 6% in Europe and 2% for the rest of the world. In 2020, the best-selling car in the whole world was the Toyota Corolla, Ford was No. 6 with Ford F-150. The Ford F-150 is the best-selling vehicle in America. I do think it's really interesting to see, specifically U.S. consumers and the demand for new cars and the continuation of the loyalty to that Ford brand will be important, especially as you've had that demand over the past year and the supply with the supply constraints have been able to quite meet that. But seeing that in the next couple of months, we'll see how they do.

Hill: This is yet another situation where I just want to fast forward to six months. With the release that's coming in early 2022 of the EV version of the Ford F-150. It's going to be really interesting to see what the demand for that is, what the deliveries look like. If they can keep up with that. Certainly, when they announced it, I think they had somewhere in the neighborhood of 50,000 reservations. I don't know if there were actual orders because it didn't involve money being put down. But I think it was in the first 48 hours, somewhere in the neighborhood of 50,000 people are like, yes, I'm very interested in possibly buying this vehicle.

Gallagher: Yeah, I think that that's what we're going to see is we have this demand in general, they are thinking about auto sales in 2021 is going to be an increase of 7% over 2020 and they're not quite reaching 2019 levels. But I think we're seeing really strong demand tick back up. I mean, we're getting closer to the happy Hondadays, which I think it just really marks when we have the holidays, everyone really is ready to go with buying cars.

Hill: Wait, what?

Gallagher: Happy Hondadays.

Hill: Are they paying you to promote this on the show?

Gallagher: I don't know but I think about it every year.

Hill: It touches one of those things that's burned into your memory from childhood?

Gallagher: Yeah. I just feel like every time I turned on the TV it was always happy Hondaday. I just think it's a good play on words. I think of it every year, I don't own a Honda. I don't necessarily will buy a Honda, but I do think about it every year.

Hill: It's certainly a much better play on words than happy Geicoween. Geico, you do a lot of things right when it comes to marketing. Just please, the Geicoween it's not working. Just move on. Just like, do something else next October, please. Anheuser-Busch InBev sold more beer in the third quarter at higher prices, all of which led to surprisingly strong profits for Budweiser's parent company, and shares of AB InBev up 12%. This is impressive just on its own. It's even more impressive when you realize they're doing this at a time when they are dealing with higher input costs.

Gallagher: Yes. Their revenue was up 8%, their total volumes were up about 4% so people are spending more. Non-beer sales were up about 8%. Beyond beer, which is their segment that's mainly hard seltzers is adding profitable growth that had over a billion in revenue year to date. What's interesting here too is that there's a lot of strong growth in South America. Mexico, Colombia, Brazil have all had really strong growth. Brazil had top-line growth of over 15% and beer volumes there are reaching all-time high. South Africa also had really strong growth. I think that's pretty interesting and they're talking about expanding into the Dominican Republic and seeing where they get traction outside of the U.S. They're expanding more as well into that hard seltzer line. They're scaling the Mike's Hard portfolio, the [...] I don't actually know how to pronounce that, it's a word I've only read. Their hard seltzer is leading in Mexico with about 50% market share. It was a really solid quarter, and I will be interested to see how demand continues in the next year or two.

Hill: Yeah. This is one of those quarters that reminds you for as much as Budweiser is a quintessential American brand that this is a global business. Again, their ability to put up these kind of numbers when they're also dealing with shipping issues like pretty much every global businesses, they're dealing with higher input costs. There are times when having that global footprint can represent a risk in terms of weakness in certain international markets. This is one of those quarters where A-B InBev demonstrates the strength of their international footprint.

Gallagher: Yeah. That diversification strategy is really strong. It's also fascinating too that during the pandemic, people started shifting more to spending on spirits when people were home and so their distillers revenue was up 8% in 2020, which was their fastest growth in 40 years. I'll be curious to see how people are now shifting back to beer and how e-commerce grows with beer. That's another thing that they noted as well is that direct-to-consumer through apps and stuff. I think it will be interesting to look at consumer spending habits within this area.

Hill: Well, and along with consumer spending habits, where do states and localities go with regulations around alcohol sales? We've seen a lot of loosening of that, certainly with restaurants and getting alcohol to go and that sort of thing. You never want to buy a stock where there are so many variables that you find yourself using the word if many times. If this happens and all that sort of thing. But the state and local regulatory picture, there's a version of it where it very much moves in the favor of businesses like Anheuser-Busch InBev and obviously, they have competition from the likes of Boston Beer Company (SAM -1.97%) and others. But this is the biggest one. This is the behemoths in the industry and they've got more levers they can pull to take advantage of a more favorable regulatory environment.

Gallagher: Yeah. Absolutely. I think they have enough connections and diversification, like you said, all over the world so that it can help them and if it hurts them, they will be able, hopefully to kind of balance out that hurt with some other growth.

Hill: Last thing before we move on. I don't know if they gave any indication of this on the call. How acquisition inclined do you think this business is right now, we've certainly seen smaller players whether it's in the beer space, certainly the hard seltzer space, we've seen smaller players pop up. Some of them struggle, for a lot of them, their goal, their end business goal is to be acquired by a behemoth like this. Did they give you any indication of that? If not, where do you think they are going in the next couple of years?

Gallagher: Well, I think that because the U.S. was down a little bit compared to international growth, I think that that would be a natural place to look for an acquisition. Especially, they have some of their hard seltzer brands so it could be something interesting kind of beyond their typical beer brands so I wouldn't be surprised if they did something like that.

Hill: Two housekeeping notes. First, earnings-palooza is happening on Motley Fool Money this week. After the bell today we've got the latest results from Apple (AAPL -1.79%), Amazon (AMZN -1.17%), and Starbucks (SBUX 0.69%), among others. We're going to hit all of those and more on a very earnings heavy Motley Fool Money so check that out this weekend. Also this weekend, sometime on Saturday, this is both a promise and a warning, a bonus episode of MarketFoolery is going to show up in your feed. It is our Apropos of Nothing episode, me and a couple of friends talking about a lot of things other than investing. If you're looking forward to that, great. That's coming sometime on Saturday. If you're looking to avoid that, consider yourself warned. We get to wrap up. This is the last show before Halloween so you're the last analyst to weigh in on overrated and underrated Halloween candy. People have been reacting. People are very passionate about their candy. If social media is any indication, people are very passionate about how they feel about analysts on this show calling out their candy as being overrated or underrated. With that, what are you going for overrated candy?

Gallagher: Well, I'm coming in passionate. I love candy. I love chocolate. I have very strong opinions. Wait, the question was overrated, right?

Hill: Overrated

Gallagher: OK. I don't like Snickers.

Hill: Wow.

Gallagher: I know that that is a pretty hot take and I'm expecting some pushback but I looked at to determine what I could find over underrated. I looked at the map of what the most popular candy is in each state and I think like five states had Snickers. I just don't think they're that redeemable. I don't like them and I don't like stickiness.

Hill: It's the stickiness, it's not the nuts.

Gallagher: No. I love chocolate with nuts. I think it's the caramel and the bottom. I don't know what the texture is at the bottom, but I don't like it.

Hill: I believe it's called nougat.

Gallagher: Yeah. It's not good. [laughs] It's a no for me.

Hill: Hard no on Snickers. OK. Underrated?

Gallagher: I really like the bags of candy where you just get a bunch of small chocolate. But in that, I really love a Mr. Goodbar. Just classic nuts and chocolate and I just think every time I get a Mr. Goodbar, I'm excited.

Hill: It is candy close to my heart and my taste buds and therefore probably my arteries but yeah, I'm right there with you on Mr. Goodbar. Bill Mann and I were talking yesterday about either the night you get back from Halloween. If you have siblings and you're trading candy, or just the next day, you get together with your friends and just the whole prospect of like, I've got this candy, I'm interested in trading, and for a lot of kids, their first introduction to value. It's like look, if you like Mr. Goodbar, and there are kids who don't like it, that's an opportunity for you to trade away your Snickers. Because to your point, Snickers is a very popular candy.

Gallagher: Yeah. I think it teaches kids. We used to do it in terms of my grandma taught me poker when she was babysitting me, and that [laughs] was how we played was we use candy and chocolate instead of chips.

Hill: That is a great grandmother.

Gallagher: Yeah. She knew what she was doing.

Hill: Maria Gallagher, great talking to you. Thanks for being here.

Gallagher: Thanks for having me.

Hill: As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you on Monday.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maria Gallagher owns shares of Etsy and PayPal Holdings. The Motley Fool owns shares of and recommends Amazon, Apple, Etsy, PayPal Holdings, Starbucks, and Tesla. The Motley Fool recommends Anheuser-Busch InBev NV, Boston Beer, and eBay and recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, short March 2023 $130 calls on Apple, short October 2021 $120 calls on Starbucks, and short October 2021 $70 calls on eBay. The Motley Fool has a disclosure policy.

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