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Analyst: Anheuser-Busch Positioning Itself Well for Long-Term Growth |
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Thursday, 20 March 2008 |
NEW YORK: UBS Investment Research Wednesday designated Anheuser-Busch Co. its top pick in the beverage sector and said the company is positioning itself very well for long-term growth, and is benefiting from the potential problems of its competitors.
UBS rates the beer manufacturer a buy with a $58 price target.
The stock has experienced a 12% decline year-to-date, the firm said, making this an attractive entry point as the company is poised to generate earnings per share growth 10% ahead of guidance.
"We understand that sales and marketing functions are better aligned, advertising decisions are more research-based, and the new key account sales structure is increasing accountability," UBS said in its note to clients. "We expect 1.5% core brand growth, with help from category strength, easy comps, and innovation."
Anheuser-Busch should also benefit from potential disruption around the Miller-Coors joint venture, UBS added.
And the company's buyback program and dividend yield provide investors with downside support at these level. The dividend yield is currently 2.8%, the highest it has been since 1995, and Anheuser-Busch repurchased over $2.7 billion of common shares in 2007. Combining these two items, the cash returned to shareholders was over 9.6% in 2007, well above the 10-year Treasury returns and the company's 10-year average return to shareholders, the firm said.
The share repurchase guidance for 2008 was $2 billion, which could mean cash return of about 8% for shareholders.
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