Anheuser-Busch Set To Consolidate Amidst Revenue Growth

Anheuser-Busch InBev SA/NV (BUD) showcased solid financial performance in the second quarter of 2023, revealing a positive trajectory in revenue. The company’s flagship brands, including Budweiser, Stella Artois, and Corona, played a pivotal role in driving this upsurge, mainly showing strong revenue growth outside their home markets. However, despite the impressive revenue outcomes, the firm saw a marginal decrease in underlying profit in the second quarter compared to the same period in the previous year, and a decline in total volumes was also observed. This article conducts a technical examination of the stock price of Anheuser-Busch to ascertain its forthcoming trajectory and to identify investment prospects. Observations indicate that the stock price is in a consolidation phase, establishing a solid foundation for a potential future uptrend.

A Glimpse of Resilience and Expansion in Anheuser-Busch’s Latest Financials

Anheuser-Busch observed a 7.2% surge in revenue in Q2 2023, coupled with a 9.0% growth in revenue per hl. This positive trajectory continued in HY23, recording a 10.0% revenue increase and a 10.6% growth in revenue per hl. The global brands, including Budweiser, Stella Artois, and Corona, have notably contributed to this uptrend, combining an 18.4% increase in revenues outside their home markets in Q2 2023 and 16.9% in HY23.

Approximately 64% of the company's revenue is generated through B2B digital platforms. The company’s digital platform, BEES, has expanded its user base to 3.3 million active users monthly, generating over $115 million of revenue through the digital direct-to-consumer ecosystem. However, despite the promising revenue indicators, the underlying profit in Q2 2023 was slightly below Q2 2022, being $1,452 million compared to $1,468 million, respectively. In contrast, HY23 saw an increase in underlying profit, amounting to $2,762 million, compared to $2,672 million in HY22.

In Q2 2023, the company experienced a decline in total volumes by 1.4%, with its beer volumes falling by 1.8%. Nonetheless, non-beer volumes saw a 0.5% increase. In HY23, there was a minor total volume decline by 0.3%, with a 0.8% decline in own beer volumes and a 2.1% increase in non-beer volumes. The underlying EPS was $0.72 in Q2 2023, slightly decreasing from $0.73 in Q2 2022 but increasing to $1.37 in HY23 from $1.33 in HY22.

Despite the volume decline and slight underlying profit reduction, Anheuser-Busch maintains a robust global momentum, with over 85% of the company’s markets experiencing revenue growth. The company’s focus on strategic initiatives like category leadership, digitizing and monetizing its ecosystem, and business optimization has allowed it to deliver consistent growth and long-term value creation, with BEES capturing approximately $9.2 billion of gross merchandise value (GMV), a 30% increase versus Q2 2022. The following chart presents the robust revenue growth, depicting the percentage change in quarterly revenues.

Furthermore, the efficient resource allocation and overhead management in HY23 have enabled Anheuser-Busch to invest approximately $2.1 billion in capex and $3.5 billion in sales and marketing, fostering the organic growth of its business. The company continues to work towards deleveraging, with net debt to EBITDA reaching 3.70x, showcasing a reduction from 3.86x as of 30 June 2022. These strategic investments and disciplined management practices underscore the company's commitment to bolstering its market presence and driving shareholder value amidst evolving market dynamics.

Exploring the Nuances of Technical Price Structures

The monthly chart for Anheuser-Busch illustrates the current technical landscape of the market, where the price is undergoing consolidation in anticipation of the subsequent move. Market analysis reveals that a bottom has been established, displaying a double bottom at $31.28 and $43.93, with the neckline at $75. This robust bullish pattern points towards potential price increments. However, the market consolidated further due to a strongly bearish candle in May 2023, delaying subsequent advancements. Subsequent candles for June, July, and August 2023 represented inside bars, indicating intense consolidation and price congestion in the market. These inside bars signify market anticipation for the next substantial move. However, the direction remains unconfirmed due to the influence of May 2023’s monthly candle altering the market outlook. Additionally, the May 2023 candle led to a decline in the RSI below the median level of 50, signaling possible prolonged market consolidation before advancements.

This price trajectory is more pronounced in the weekly chart, which displays a pristine inverted head and shoulders, the head at $43.93 and shoulders at $49.93 and $52.93, with the neckline at $67. These patterns are predominantly bullish and underscore the probable bullish trajectory if the neckline is distinctly breached. Nevertheless, even with the bullish pattern, a consolidating RSI below 50 amplifies the likelihood of additional declines before the next move. Therefore, investors might consider a breakout at $67 before buying, or if the price descends to around $30, long positions could be initiated.

Pronounced consolidations are similarly observed in the short-term daily chart below, which delineates a triangle within which the price is consolidating and becoming congested. A triangle breakout could determine the subsequent direction. Investors might await more opportune moments to enter the market, but a breach above $67 could elevate the likelihood of price elevation.

Market Risk

Anheuser-Busch has encountered a reduction in total volumes and a marginal decrease in underlying profits during Q2 2023. This ongoing decline in beer volumes and profitability, occurring paradoxically with increased revenue, could present significant risks to the market's stability and projected growth, making a careful and strategic market analysis imperative. Furthermore, reviewing the monthly, weekly, and daily charts reveals that Anheuser-Busch’s price is consolidating. This consolidation, marked by inside bars and triangles, suggests a potentially significant market move is on the horizon; however, the direction remains undetermined, introducing a layer of uncertainty and risk for investors.

In addition, despite bullish patterns, the RSI is consolidating below 50, signals the possibility of further declines before any upward movement, a factor that can significantly affect investment decisions. Furthermore, the company generates approximately 64% of its revenue through B2B digital platforms like BEES. Although this platform has seen substantial user base expansion, potential disruptions, security threats, or advancements from competitors in the digital space pose a significant risk to the revenue structure of Anheuser-Busch, necessitating vigilance and strategic foresight.

Bottom Line

In conclusion, Anheuser-Busch has showcased solid financial achievements in Q2 2023, driven by renowned brands like Budweiser, Stella Artois, and Corona, coupled with a robust market presence and significant revenue growth, despite facing decreased profits and total volumes, hinting at the complex market and operational environments it operates in. Critical leadership, digitalization, and business optimization strategies have been fundamental, with the BEES platform contributing substantially to the company's value. However, the current stock consolidation and ambiguous market patterns suggest potential risks and uncertainties, requiring careful and strategic considerations from investors and stakeholders. Anheuser-Busch’s commitment to disciplined management and efficient resource allocation demonstrates its steadfast approach to strengthening its market presence and enhancing shareholder value amid fluctuating market conditions. The juxtaposition of increased revenue against decreased volumes and profitability underscores the necessity for reasonable investment and strategic prudence.

From a technical viewpoint, the stock price exhibits bullish formations, but a surge above $67 is initially necessary to validate the bullish inverted head and shoulders. The monthly candle for May 2023 has led the stock price to experience a sideways consolidation, and investors might find it prudent to delay investment decisions. However, if the stock price retraces lower to $30, it could be perceived as an advantageous juncture to augment long positions.