JPMorgan Downgrades Anheuser-Busch Inbev to Underweight

Says: « No longer the King. » Per JPMorgan’s morning note: « For over a decade ABI has been a beacon of high growth across European Beverages. ABI used attractive financing to consolidate the global beer industry. This historically led to superior pricing power, which combined with superior execution and cost cutting, resulted in well above-average profit growth. We believe the era of above-average growth for ABI is now behind us. The market is too optimistic, in our view, about the turnaround in Brazil as well as the ability of ABI’s Global Brands ex. domestic markets to offset ongoing challenges in the US. We expect underperformance in the US, which may have FCF repercussions, to weigh on group profit until at least FY20E. On our estimates, ABI trades on a CY18E P/E of 23.4x; marking a still material premium to the European Beverages sector ex ABI at 21x, despite in-line underlying growth and ongoing challenges. We downgrade ABI to Underweight with recent underperformance likely to persist. We see better growth opportunities in Diageo (CY18E P/E 20.9x). »

The broker also published a report on European beverages, where it writes Diageo is one of its favorite picks in the sector, along with CCH.

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