The king ain't dead yet, folks. Long live the King of Beers!

On Wednesday, Anheuser-Busch (NYSE:BUD) finally proved itself worthy of that title when it topped consensus estimates for both sales and profits for the first time in a year. Reporting $0.95 per share in profits on sales of $4.62 billion, the nation's preeminent bierbrauer finally broke itself out of this year's slump and into double-digit growth territory -- for profits, that is. Sales grew only 8% year over year, but the company's profits doubled that increase.

How'd they do that?
A-B's growth is a result of several factors working together. First and foremost, it sold more stuff. There was an across-the-board increase in beer by volume shipped, with U.S. shipments up 2% in the third quarter, international shipments up 8.2% (hola, Mexico!), and equity partner brands' shipments rising 7.6%. Mix it all together, and total volume growth accelerated from the 3.2% pace so far this year, to 4.1% in Q3.

Second, A-B widened the margins it earns on sales. Earnings before taxes as a percentage of gross sales increased 40 basis points to 16.6%. The net margin, rising to 13.5%, followed in lockstep. Part of the improvement no doubt stems from improved economies of scale. A-B's U.S. market share, for example, inched up 10 basis points -- an important improvement as competitors SAB Miller and Molson Coors (NYSE:TAP) combine to attempt to depose the king.

As for the rest, A-B credited "favorable brand mix" and price increases from earlier in the year for the improved margins. Speaking of which, expect more of the same next year, as the company plans to increase prices again in early 2008.

The company may not yet be earning the kinds of operating margins that its liquor lush cousins Diageo (NYSE:DEO), Brown-Forman (NYSE:BF-B), and Fortune Brands (NYSE:FO) pull down, but it's just stomping Molson Coors and Constellation Brands (NYSE:STZ) in that department.

Hear that hiss?
There is, however, one area where this Bud may not be for you -- cash profits. A-B's free cash flow comes to just less than $1.9 billion so far this year, slightly less than net profits under GAAP. At less than 9% year-over-year growth, cash profits appear to be rising less swiftly than accounting profits. At this rate, the company looks as though it could end the year with about $2.5 billion in free cash flow, giving it a price-to-free cash flow ratio of 15.5. Weighed against the firm's long-term hopes of growing profits at 7% to 10% per year, that looks a mite expensive.

Weighed against its actual performance this year -- sub-9% growth -- the valuation smells positively skunky.

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