Based in Sao Paulo, Brazil, Ambev SA (ABEV) recently released impressive results for the third quarter, with an 18.5% year-over-year increase in net income to 18.49 billion reais ($ 3.35 billion). Its adjusted profit was 3.75 billion reais ($ 679.90 million), which is a 50.4% increase year-over-year, with reopening of bars and restaurants leading to an increase. Sales.
Over the past month, the stock gained 16.8% to close yesterday’s trading session at $ 3.20.
However, the share price has fallen 0.3% over the past three months and is currently trading 19% below its 52-week high of $ 3.95, reached on June 8, 2021. The company also did not provide advice for the fourth quarter. Bank of America analysts have warned investors against certain headwinds forecast for 2022. Thus, ABEV’s short-term outlook appears uncertain.
Here is what could influence ABEV’s performance in the coming months:
Favorable analyst estimates
Analysts expect ABEV’s revenue to grow 8.1% for the quarter ending December 31, 2021 and 12.6% this year. In addition, its EPS is expected to grow at a rate of 7.9% per year over the next five years. Additionally, Wall Street analysts expect the stock to hit $ 3.46 in the near term, indicating a potential of 8.1% increase.
In terms of net profit margin over the last 12 months, ABEV’s 22.84% is 333.6% higher than the industry average of 5.27%. Likewise, its leverage over the last 12 months of 17.19% FCF the margin is 256.2% above the industry average of 4.83%. Additionally, the stock’s 12-month CAPEX / Sales at 8.73% is 183.1% above the industry average of 3.09%.
Head winds of the market
âWhile the short-term demand scenario is constructive, we will see a deterioration of the consumption environment in 2022 and increased competition in Brazil, with the commissioning of new capacities in the coming years, while that FOREX volatility and high costs are expected to remain headwinds, âBank of America analysts said.
In terms of forward P / S, ABEV’s 4.04x is 169.4% above the industry average 1.50x. Likewise, its front EV / S of 3.86x is 90.3% higher than the industry average of 2.03x. And the stock’s respective non-GAAP futures P / E and P / B of 22.57x and 3.56x are above the industry averages of 20.25x and 3.41x.
POWR ratings reflect grim prospects
ABEV has an overall rating of C, which equates to Neutral in our POWR odds system. POWR scores are calculated taking into account 118 separate factors, each factor being weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight distinct categories. ABEV has a C rating for value, which is in line with its higher valuation ratios than the industry.
The stock has a D rating for Momentum, which matches its price drop of 24.5% over the past three years and negative returns of 41.6% over the past five years.
ABEV also has a D rating for growth. This is justified because its EPS is expected to drop 50% year over year to $ 0.04 for the current quarter, ending December 31, 2021.
ABEV is ranked n Â° 17 out of 36 shares in the Beverages industry. Click here to also access ABEV’s ratings for quality, sentiment and stability.
Even though ABEV posted impressive results in the second quarter, its short-term outlook appears uncertain amid expectations that rising commodity prices will keep its finances under pressure in the fourth quarter. Since the stock looks overvalued at the current price point, we think it might be wise to wait for a better entry point.
How does Ambev (ABEV) compare to its peers?
Although ABEV has an overall POWR rating of C, one can consider investing in beverage stocks with an A (strong buy) rating, such as Coca-Cola Consolidated, Inc. (COKE), Compania Cervecerias Unidas, SA (CCU), and Coca-Cola Femsa SAB from CV ADR (KOF).
ABEV stock was trading at $ 3.25 per share on Wednesday afternoon, up $ 0.05 (+ 1.56%). Year-to-date, ABEV has gained 6.73%, compared to a 26.01% increase in the benchmark S&P 500 over the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s a passionate interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach he takes while advising investors in his articles. Following…
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