What happened
Owners of Anheuser-Busch InBev (BUD 0.66%) stock beat the market in April as shares rose 2% compared to a 9% dive in the S&P 500, according to data provided by S&P Global Market Intelligence. That uptick wasn't enough to put investors in positive territory for 2022, but it helped keep their stock ahead of the market so far for the year.
The boost was powered by rising optimism about InBev's sales outlook, which the company confirmed in a recent earnings report.
Image source: Getty Images.
So what
Investors heard from several of InBev's peers last month, including beverage giant Coca-Cola and alcoholic drink specialist Constellation Brands, which indicated solid demand in the industry.
Coke revealed strong sales growth in key markets around the world through early 2022, and Constellation Brands said in April that consumers are eagerly spending more cash on popular imported beer brands.
That news pushed InBev's stock higher in April, but shares also benefited from a shift in investor sentiment. Wall Street today is favoring sturdy businesses with proven pricing power, given the signs of an impending economic slowdown. In contrast, many investors are moving away from high-growth stocks, partly due to fears about a sharp sales deceleration during the next recession.
Now what
The April optimism turned out to be well placed. InBev reported on May 5 that sales trends, while slowing, remained solidly positive in early 2022. Beer volumes were up 3% for the period compared to 4% in the prior quarter.
And InBev had no trouble passing along higher costs in the form of rising prices. That success translates into pricing power, and it kept the company's profit margins high even as costs rose for wages, transportation, and aluminum. "Relentless execution of our strategy ... drove continued momentum in the first quarter," CEO Michel Doukeris said in a press release.
InBev's growth initiatives for the rest of 2022 include pushing further into premium beverages and non-beer beverages like hard ciders, teas, and juices. InBev's digital platform is also helping boost sales and margins.
But the best reason to like this stock today is that the company's dominant position in the consumer staples niche means it will likely perform well through a wide range of economic environments. Alcoholic beverage sales don't tend to collapse during recessions, in contrast to consumer discretionary industries like travel and automobiles. That stability is the main factor that convinced more investors to buy its shares in April.
