Anheuser-Busch (NYSE: BUD) stunned the cynics last quarter when it beat earnings forecasts for the first time in a year. But will the King of Beers retain its crown when it announces fourth-quarter and full-year 2007 earnings news tomorrow?

What analysts say:

  • Buy, sell, or waffle? Eighteen analysts follow Budweiser. Five want to buy it, 12 more are content to hold, and one would sell the shares.
  • Revenue. On average, analysts expect quarterly sales to increase 6.5% to $3.65 billion.
  • Earnings. Profits are predicted to rise 28% to $0.32 per share.

What management says:
A few months back, comparing the bierbrauer unfavorably to liquor purveyors Diageo (NYSE: DEO), Brown-Forman (NYSE: BF-B), and Fortune Brands (NYSE: FO), fellow Fool Ryan Fuhrmann tagged A-B with the moniker "King of Mediocrity." But at least things don't seem to be getting any worse. In fact, they may even be improving. According to a Jan. 7 update on sales trends, A-B confirmed that its U.S. beer shipments to wholesalers, by volume, closed out last year up 2% from fiscal 2006. Even better, in the fourth quarter alone, such shipments rose 3.4% year over year -- yet wholesaler inventories at year's end "were approximately the same as year end 2006." So the consumer demand seems to be there to drink up the extra pilsner.

What management does:
Sales climbed 8% last quarter, and profits rose 16%. A-B has managed to keep its bottom-line net margin more or less intact, so profits have been able to track sales growth. Ryan credits the company's industry-leading market share in the U.S. for giving it the pricing power to maintain those margins. The flip side of that argument, as Fool Rich Duprey pointed out earlier this month, is that a merger between SABMiller and Molson Coors (NYSE: TAP) could have sufficient scale to challenge the King for its price-setting crown.

Margins

6/06

9/06

12/06

3/06

6/07

9/07

Gross

35.5%

35.5%

35.3%

35.4%

35.2%

35.2%

Operating

17.2%

17.3%

17.3%

17.2%

17.0%

17.1%

Net

11.6%

11.3%

12.5%

12.5%

12.6%

12.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The stock currently trades for nearly 17 times trailing earnings and 18 times trailing free cash flow. With analysts expecting less than 9% annual profits growth over the next five years, I consider A-B overpriced by either measure. Sure, maybe the King will surprise us and turn in double-digit profits growth. But with its U.S. archrival now getting bigger, I wouldn't bet on it.

Drink up with more Foolishness:

So why do the deep-value diggers at Inside Value continue to recommend the stock, even as it enters its second year of lagging the market? That question may just answer itself. Read the full investment thesis when you sign up for your 30-day free trial to Inside Value.

Fool contributor Rich Smith does not own shares of any company named above. Diageo is an Income Investor selection. The Motley Fool has a disclosure policy.