Yesterday, AB InBev (BUD – Snapshot Report) announced it would switching up its marketing of the popular Budweiser brand. The company wants to call the beer “America” and change the label to reflect all sorts of patriotic themes. That’s not the reason I’m making the stock today’s Bear of the Day but it sure makes for a great story. You can check out my stance on the subject by viewing this light-hearted video I made about it titled InBev Bumps Budweiser for America this Summer
The reason I’m bearish on InBev is it’s a Zacks Rank #5(Strong Sell) with a Value Style Score of F and a Momentum Style Score of D. That tells me the valuations are a little out of whack and the estimate revisions haven’t been moving in the right direction.
Over the last ninety days two analysts have dropped their earnings estimates for the current year, while a single analyst has done so for next year’s numbers. The bearish sentiment has dropped the current year Zacks Consensus Estimate from $5.23 to $3.96. Looking at next year’s numbers, consensus has gone from $5.67 down to $4.50. The bearishness follows up on a drastic quarter for the company where EPS came in at 51 cents versus estimates calling for 87 cents.
The stock has been surprisingly resilient in the face of these downward earnings estimates. Since bottoming out just above $100 in October, the stock has approached $130 on several occasions. The most recent push to the highs stalled out just a few weeks ago. There is a bullish trend line providing support just below the current price action. And the Commodity Channel Index just crossed the zero line. So in the short term there’s actually a lot of momentum here.
However, eventually the fundamentals win out. Stocks tend to track with their earnings and if analysts are right about dropping their estimates, then this stock could be setting up for disaster in the intermediate term. If your bent on getting exposure to this industry, you should look at Zacks Rank #1 (Strong Buy) Molson Coors (TAP – Analyst Report) or Zacks Rank #2(Buy) Constellation Brands (STZ – Analyst Report).