Brew up Growth With These Beer Companies
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Beer stocks have performed well in recent years, and a few of them are poised for further growth in 2013 and beyond. A reality of human nature is that most of us have a vice, and these companies offer both satisfying beverages to adult consumers and growth to shareholders. After solid performance in 2012, is there more room to run for these beer stocks? Or, conversely, have shares gotten too frothy?
Anheuser-Busch InBev (NYSE: BUD) offers the juggernaut Budweiser brand, among others. In a widely publicized merger, Anheuser-Busch was taken over by Belgian-based InBev in 2008 for $52 billion. The merger activity didn’t stop there: in 2012 the newly combined entity acquired the remaining portion of Groupo Modelo, maker of Corona, for $20.1 billion. AB-InBev now has a portfolio of approximately 200 beer brands, including Stella Artois, Becks, and Michelob, in addition to Budweiser and Corona. The newly-formed beer giant now operates in 24 countries and employs 190,000 people worldwide. AB-InBev offers investors a divided yield of slightly less than 2% at current prices. Through the first nine months of 2012, AB-InBev saw net revenues increase 6.7% with volumes increasing about a half of one percent. Meanwhile, normalized earnings per share grew more than 21% through the first three quarters versus the prior year. After increasing 47% last year, the stock now carries a $144 billion market value and a trailing price-to-earnings ratio in the high teens.
Molson Coors (NYSE: TAP) is a much smaller competitor with a market capitalization of $8 billion. Molson Coors made its first break into emerging market expansion with its $3.4 billion acquisition of Central and East European brewer StarBev last year. Until then, the United States made up more than 68% of Molson Coors’ total sales, and the company’s international operations were limited to Canada and the United Kingdom. By acquiring StarBev, the company will boost its portfolio of brands and grant it access to faster-developing economies. Unfortunately for dividend growth investors, the acquisition brought a halt to the company’s habit of increasing its dividend on an annual basis. The stock yields roughly 3% at current prices. Molson Coors is the most modestly valued of the three stocks, with a trailing P/E ratio of 14 times.
Heineken (NASDAQOTH: HEINY) is a $39 billion Netherlands-based brewer, ideal for investors looking for heavy international exposure. Heineken maintains a large number of successful brands, including its namesake Heineken, as well as Amstel, Dos Equis, Fosters, Newcastle and Tecate. In all, the company owns and operates more than 250 brands and sells them in 170 markets. Heineken is more heavily geared towards the emerging markets than the previous two companies. The emerging markets account for 65% of the company’s volumes and 50% of its earnings before interest and taxes. Heineken offers a dividend of about 1.6% at current prices. Over the last four years, Heineken’s revenues and net income grew by 2.3% and 12% compounded annually. Shares went on a tear in 2012, increasing by more than 40%.
The Bottom Line
Each of these three stocks offers investors a different combination of growth and dividends. Anheuser-Busch InBev and Heineken have grown sales and earnings faster than Molson Coors. While Molson Coors is trying to catch up to tapping into the growth potential of the emerging markets, it offers investors a higher dividend yield and a lower valuation than its two peers. For investors intrigued by strong brands, compelling growth rates and rising dividends, these three names are worthy of further research.
Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Molson Coors Brewing Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!