US: A-B rating gets upgrade

By | 20 July 2006

US brewing giant Anheuser-Busch has had its coverage raised.

Investment analyst Stifel Nicolaus yesterday (19 July) upped its rating of the brewer to 'buy' from 'hold', while establishing a 12-month target price of US$52 per share. "We consider valuation undemanding and believe market expectations for core earnings are too low," Stifel Nicolaus said.

"Modelo, of whom A-B owns 50%, expects its just-announced export joint venture to increase operating income by approximately 25%, or 2007 accretion equivalent to approximately US$0.12 in recurring EPS for BUD," analyst Mark Swartzberg said. "This is above our prior estimate of $0.04.

"Taking a new look at A-B's margin erosion in 2005," Swartzberg continued, "We find that an emerging improvement in the US pricing environment is more important than previously believed. Relatedly, while we are sensitive to marketplace jitters - "How will Miller respond to months of share loss?" - we expect A-B to meet success raising prices again this fall."

The analyst raised its 2006 and 2007 EPS estimates to US$2.50 - up by US$0.03 - and US$2.81 - up US$0.08 - respectively.

Sectors: Beer & cider

Companies: A-B, Modelo

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