Anheuser-Busch (BUD)

Beer powerhouse Anheuser-Busch InBev (NYSE:BUD) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 6.3% year on year to $13.63 billion. Its GAAP profit of $0.81 per share was 16% below analysts’ consensus estimates.

Company Overview

Born out of a complicated web of mergers and acquisitions, Anheuser-Busch InBev (NYSE:BUD) boasts a powerhouse beer portfolio of Budweiser, Stella Artois, Corona, and local favorites around the world.

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Competitors in the beer industry include Heineken (ENXTAM:HEIA), Constellation Brands (NYSE:STZ), Carlsberg (CPSE:CARL B), and numerous regional brewers globally.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $58.85 billion in revenue over the past 12 months, Anheuser-Busch is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. To expand meaningfully, Anheuser-Busch likely needs to tweak its prices, innovate with new products, or enter new markets.

As you can see below, Anheuser-Busch’s 2.1% annualized revenue growth over the last three years was sluggish as consumers bought less of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Anheuser-Busch missed Wall Street’s estimates and reported a rather uninspiring 6.3% year-on-year revenue decline, generating $13.63 billion of revenue.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates. This signals Anheuser-Busch could be a hidden gem because it doesn’t get attention from professional brokers.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Anheuser-Busch generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Anheuser-Busch’s average quarterly sales volumes have shrunk by 1.9%. This decrease isn’t ideal as the quantity demanded for consumer staples products is typically stable. Luckily, Anheuser-Busch was able to offset fewer customers purchasing its products by charging higher prices, enabling it to generate 2.7% average organic revenue growth. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren’t sustainable over the long term unless the business is really really special.

In Anheuser-Busch’s Q1 2025, sales volumes dropped 2.2% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

Anheuser-Busch has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 54.7% gross margin over the last two years. That means Anheuser-Busch only paid its suppliers $45.26 for every $100 in revenue.

This quarter, Anheuser-Busch’s gross profit margin was 55.7%, marking a 1.4 percentage point increase from 54.3% in the same quarter last year. Anheuser-Busch’s full-year margin has also been trending up over the past 12 months, increasing by 1.7 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as raw materials).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Anheuser-Busch has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer staples business, boasting an average operating margin of 25.1%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Anheuser-Busch’s operating margin rose by 1.5 percentage points over the last year, as its sales growth gave it operating leverage.

In Q1, Anheuser-Busch generated an operating profit margin of 26.3%, up 1.4 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Anheuser-Busch’s EPS grew at a remarkable 16.3% compounded annual growth rate over the last three years, higher than its 2.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q1, Anheuser-Busch reported EPS at $0.81, up from $0.54 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data. This signals Anheuser-Busch could be a hidden gem because it doesn’t have much coverage among professional brokers.

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Anheuser-Busch’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.9%, slightly better than typical consumer staples business.

Anheuser-Busch reported $0 of cash and $0 of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $20.83 billion of EBITDA over the last 12 months, we view Anheuser-Busch’s 0.0× net-debt-to-EBITDA ratio as safe. We also see its $2.47 billion of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Anheuser-Busch narrowly top analysts’ EBITDA expectations this quarter. On the other hand, its EPS missed significantly and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter, but the stock traded up 2.3% to $67.04 immediately after reporting.

Updated: July 9, 2025 at 10:46 PM EDT

Before making an investment decision, investors should account for Anheuser-Busch’s business fundamentals and valuation in addition to what happened in the latest quarter.

Anheuser-Busch’s business quality ultimately falls short of our standards. To kick things off, its revenue growth was uninspiring over the last three years. And while its impressive operating margins show it has a highly efficient business model, the downside is its shrinking sales volumes suggest it’ll need to change its strategy to succeed. On top of that, its projected EPS for the next year is lacking.

Anheuser-Busch’s EV-to-EBITDA ratio based on the next 12 months is 8.1x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $77.88 on the company (compared to the current share price of $67.88).