Shares of international beer giants Heineken(OTC: HEINY), Anheuser-Busch InBev(NYSE: BUD), and Boston Beer(NYSE: SAM) were falling in Monday's trading, down 10.4%, 2.4%, and 3%, respectively, as of 12:38 p.m. ET.
These beer giants fell after Heineken reported its first-half numbers today, which marked a deceleration from the first quarter, souring the mood after Boston Beer positively surprised last week.
Heineken grows, but less than expected
European companies tend to report half-year cumulative results at a time, rather than going quarter-by-quarter. So while Amsterdam-based Heineken posted first-half numbers today that may have looked good on the outside, they actually marked a big deceleration from its first-quarter results, which implied second-quarter growth that was much lower. The company also took a big impairment charge on a China investment.
On a BEIA basis, which stands for "before exceptional items and amortization of acquisition-related intangible assets," which is akin to non-GAAP (adjusted) figures given by U.S. companies, first-half 2024 net revenue grew by 6% on beer volume growth of 2.1%, while operating profit grew 12.5% as margins expanded. Management also forecast operating profits to grow between 4% and 8% this year.
However, the numbers were below BEIA first-quarter figures of 9.4% revenue growth and beer volume growth of 4.7%, suggesting a big revenue deceleration and a possible volume decline in Q2. The figures were also below analyst expectations. Market analysts had forecast 3.2% volume growth in the first half and 8.2% operating profit growth for the year.
Adding to the sour mood, Heineken management took an 874 million euro ($948.9 million) impairment charge on its $3.1 billion investment in China Resources Beer, an investment Heineken made in 2018. Management noted the impairment was due to the ongoing economic turmoil and sluggish consumer spending in China.
Still, Heineken's numbers were much better than Boston Beer's 4% revenue decline it posted last week, even though Boston Beer's lowly results were ahead of analysts' conservative expectations. While Boston Beer stock surged last week on its "beat," it appears Heineken's weaker-than-expected figures cast a pall over the global beer industry again today. Boston Beer stock gave back more than half its post-earnings gains from last week, while Anheuser-Busch InBev, which reports on Thursday, Aug. 1, fell in sympathy.
Is Heineken a buy on the dip?
Like Boston Beer, analysts expect Anheuser-Busch InBev to post a revenue decline for the June-ended quarter, although earnings estimates are for about flat earnings per share, thanks to cost controls. That makes Heineken's results look downright terrific by comparison.
Moreover, Heineken is actually the cheapest of these three big beer stocks:
HEINY PE Ratio data by YCharts
The discount could be attributed to Heineken being a European stock, a market where companies tend to trade cheaper than U.S. companies do, generally speaking.
Global consumers still appear hesitant to shell out for as much beer as they used to, due to higher interest rates and low consumer confidence after several years of inflation. Moreover, the beer industry has to contend with substitutes like cannabis gaining favor in newly legal geographies. Still, Heineken's relative outperformance and cheaper valuation suggests it may be a buy on the dip for those investors looking to play a bounce-back in consumer spending generally and beer consumption specifically.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boston Beer. The Motley Fool has a disclosure policy.
