Shares of Bud Light’s parent company, Anheuser-Busch InBev, surged as much as 4% after Bank of America upgraded the stock from Neutral to Buy. Analysts believe that the impact of the Bud Light boycott fallout, input cost pressures, and investments in Latin America are already priced into the stock. Anheuser-Busch InBev’s margins are expected to improve as cost of goods sold pressures ease and the company’s higher cost of doing business is now largely factored into its performance. While Bud Light has struggled in recent months, with sales declining and losing its top spot to Modelo, analysts anticipate a 300-basis-point increase in margins over the next three years. The company’s competitors, such as Molson Coors and Constellation Brands, have seen their stocks perform well this year, while Anheuser-Busch InBev’s stock is down 7.7% year-to-date.
Despite the struggles faced by Bud Light, Anheuser-Busch InBev reported a slight beat on earnings per share in its most recent quarterly results. However, volume declines have yet to recover for the company, highlighting the challenges it still faces. Sales of Bud Light are down 28.1% compared to a year ago, while other brands in Anheuser-Busch InBev’s portfolio, such as Budweiser and Michelob Ultra, have also seen declines. The company will need to invest a significant amount of money to rebuild the Bud Light brand after the declines earlier this year. Analysts expect that this football season, beer brands will face uncertainties given Bud Light’s struggles, as competitors will work hard to make it difficult for the brand to regain its market position.
Bank of America’s upgrade of Anheuser-Busch InBev stock represents a potential turning point for the declining margins of Bud Light. While challenges persist, the company’s Latin America exposure and pricing power are expected to support earnings per share growth. The improved profit growth outlook and the anticipation of a 300-basis-point increase in margins over the next three years have driven the stock price up. However, Bud Light sales continue to suffer, with a decline of 28.1% compared to the previous year. Anheuser-Busch InBev will need to invest heavily to rebuild the brand and compete with rivals like Modelo. Overall, the company’s stock performance has been lackluster this year compared to its competitors.