Anheuser-Busch (BUD) Whiffs on Q2 Earnings — Is Big Beer Dead?

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Shares of Anheuser-Busch (BUD) are getting pummeled on Thursday after second-quarter results left much to be desired. Now BUD stock, up 11% year-to-date before the report, is giving up a big chunk of its 2015 gains today, with shares losing as much as 5% in Thursday’s early trading.

Anheuser Busch (BUD) Whiffs on Q2 Earnings -- Is Big Beer Dead?Both revenue and earnings per share were down sharply in the quarter, as Big Beer continues its war against upstart craft brewers.

Anheuser even admitted that the second quarter was “challenging,” and poor sales in the U.S., China and Brazil easily confirmed that not-so-bold claim.

Now that the $1 billion share buyback program Anheuser hastily instituted in February (after its fourth-quarter earnings miss) is over, what, pray tell, can the company do to make BUD stock an attractive investment?

Given the way things are going right now, not much.

BUD Earnings Breakdown

It’s not like analysts expected Anheuser to do anything revolutionary. In fact, Wall Street was projecting revenue to fall 5% from $12.2 billion in the year-ago quarter to $11.57 billion in Q2 2015. Lowered expectations be damned: Revenue fell more than 9%, missing by $500 million and clocking in at $11.05 billion. BUD’s EPS, which was $1.60 a year ago, fell about 25% to $1.21, missing consensus estimates by 14 cents.

It’s not just BUD that’s having trouble finding new avenues for growth. Revenues are also expected to tumble at Molson Coors (TAP) in the second quarter.

Even though Anheuser boasts an enviable portfolio of global brands — BUD owns six of the 10 most valuable beer brands in the world, including Budweiser, Bud Light, Corona and Stella Artois — it is the small-time craft brewers that are wreaking havoc on the industry.

Anheuser and its Big Beer peers are traditional to a fault, with bulky tools and advanced technology that give them an advantage on paper; While craft brewers prefer guerrilla warfare, blending in with the common folk and taking to the countryside.

BUD stock investors might wonder: Why not just acquire these pesky craft guys? Well, “If you can’t beat ’em, buy ’em,” actually has been the strategy for a couple of years now.

InvestorPlace‘s Charles Sizemore pointed out some of the inherent difficulties with acquiring craft brewers last year:

“Another issue is economies of scale. The beauty of Big Beer operations is their massive and efficient production and distribution. But this goes completely out the window when you buy a locally-produced microbrew. Mass producing it and selling it nationally — or globally — kills the ‘buy it local’ vibe that helped make it popular. But keeping it local neutralizes Big Beer’s marketing and distribution power.”

As if BUD didn’t have enough problems on its hands, results were also negatively impacted by the termination of its global distribution agreement with Monster Energy (MNST), which began using Coca-Cola’s (KO) distribution system last year when KO bought a stake in MNST.

Listen, with revenue of more than $11 billion last quarter, BUD stock isn’t dead yet, and Big Beer is still kickin’, too.

But the only reason to buy BUD now is for its dividend, which sits at 3.6%. And with shares off 5% in a single day, that’s not too reassuring.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/anheuser-busch-bud-stock/.

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