Anheuser Busch InBev SA is Ready to Wow Investors

Anheuser-Busch InBev (BUD 0.97%) is set to report third quarter earnings on October 31. Current projections call for growth on the top and bottom lines. The company's stock has performed well year-to-date, gaining over 17.5% and catching the eyes of analysts and investors alike. Let's take a look at the financials to see whether we should pick up a position now or wait until after earnings are released. 

The brewmaster
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.

Summer report
On July 31, A-B InBev released second quarter earnings. The results were mixed in comparison with analyst estimates and looked like this:

Revenue rose 3.9% year-over-year. Earnings fell 23% due to higher net financing costs and income tax expenses. The company's power brand Budweiser led the way in the quarter with sales growing an impressive 6.3% globally. However, the most impressive statistic reported was that gross margin expanded 78 basis points to 58%; this is much higher than A-B InBev's largest U.S. competitor, Molson Coors, which sports a 41.9% margin. After the release, the company received upgrades at four different firms and the stock has risen 9.4% since then.

Results due out
Here are the current consensus analyst estimates:

These projections would result in earnings growth of 12.8% and revenue growth of 16.9% compared with the third quarter of 2012. With that said, there are two main things I will be looking for in this report; first, I would like to see the margin expand again, because this was the most loved statistic by analysts and was a catalyst in causing upgrades. Secondly, I will be looking for an update on the Grupo Modelo acquisition and would like to hear about the positive impact it has had on the financials. Overall, I expect A-B InBev to exceed expectations due to brand strength and the aforementioned Grupo Modelo acquisition, as well as increased consumer spending in the industry.

Update on the competition
On September 12, we made a comparison of A-B InBev to two of its top competitors, Molson Coors Brewing Company (TAP 0.62%) and Boston Beer Co. (SAM 1.34%). We concluded that A-B InBev had the most upside potential, Boston Beer was worthy of an investment after a slight pullback, and Molson Coors was our third favorite due to its sub-par product mix. Let's see how each has performed since:

All three companies have widely outperformed the overall market and have shown strength going into earnings season. All have favorable forward earnings estimates. I still believe A-B InBev will provide the highest returns to investors; this is because it has the best product mix, high projected earnings growth, and a healthy 1.8% dividend to boot. Boston Beer is set to report earnings on October 30 and could become a high-flyer due to the conservative estimates currently expected. Molson Coors reports on November 6, so I would wait and see how Boston Beer and A-B InBev do to gauge the overall strength of the industry. 

The Foolish bottom line
Anheuser-Busch InBev is one of the largest companies in the world with arguably the strongest brand portfolio. It has risen over 17.5% year-to-date, but is still undervalued based on forward earnings estimates and sales projections. The company is set to release earnings in just a few days, so keep and close eye on this one as any weakness would provide a great entry point for investors. For Foolish investors looking for a play in the beer market Anheuser-Busch InBev is more than worth a closer look.