USA: Anheuser-Busch stock rises on brokerage upgrades

Shares of Anheuser-Busch, the largest US brewer, rose almost 2 % that is to a two-month high on Tuesday after two Wall Street analysts, Bear Stearns and Deutsche Bank, raised their ratings on the largest U.S. brewer, citing optimism about volume trends, Financial Times and Reuters posted on March 14.

Bear Stearns analyst Carlos Laboy, who upgraded the company to "peer perform" from "underperform," also cited recent import deals. "Anheuser-Busch has woken from its deep mergers and acquisition sleep for import and non-U.S. growth," Bear Stearns analyst Laboy wrote.

Carlos Laboy of Bear Stearns, said: "After a disastrous year in 2005, we see real urgency from Anheuser management to plug the holes in its US portfolio, get more global in its thinking and figure out a way to apply competitive pressure to [SABMiller] without upsetting the economics of the US beer industry."

Anheuser, which controls almost half the US beer market, now appeared poised to take advantage of improving volume trends, the analysts said.

The brewer was also likely to benefit from recent deals to start importing foreign beers into the US, addressing a key Anheuser weakness. Imported beers sell for almost double the price of standard, mass beers like Budweiser, Miller and Coors.

This week, Anheuser said it would become the US importer for Singapore's Tiger beer, produced by Asia Pacific Breweries, a joint venture between Fraser & Neave and Heineken. Anheuser will also import Grolsch into the US for the first time, starting next month.

In a significant expansion of the Budweiser brand overseas, Anheuser last week agreed to license the production of Budweiser in Russia to Heineken.

Last summer, the maker of Budweiser and Michelob beers launched a price war that has helped stabilise the brewer's market share, especially against SABMiller, second-ranked brewer in the US.

Anheuser has been launching initiatives aimed at attracting younger drinkers, such as suggesting beer and food pairings. Such drinkers have recently been defecting to wine and spirits.

The shift by analysts will be seen by the St Louis, Missouri-based brewer as vindication of its price-cutting strategy, which drew sharp criticism last year from Wall Street. Analysts had said it threatened to erode the "brand value" of beer.

It is also likely to be welcomed by Warren Buffett, whose Berkshire Hathaway investment vehicle is Anheuser's largest single shareholder. Mr Buffett bought the shares last year as they slid to a four-year low, reached last month.

Anheuser last month said it had restored its domestic beer volume and market share growth in the second half of last year.

Sales momentum continued into this year, with wholesalers' sales to retailers up 2.9 per cent up to mid-February.

The brewer also forecast a 1-2 per cent rise revenue per barrel this year as the company started raising prices again. Marc Greenberg of Deutsche Bank said: "Early 2006 momentum is encouraging and price increases are holding."

The price war involved steep discounting through the use of coupons, which had been hurting profits at Anheuser's distributors.

With the inclusion of Grolsch and Tiger beer "these new brands should give Anheuser distributors a better volume and profit growth story to tell the retail trade into the busy summer selling season", Mr Laboy said.

However Anheuser last month lowered its estimate for long-term earnings per share growth to 7-10 per cent, from double digits, in an apparent recognition that the beer market will still be tough for some time.

Anheuser's profits fell by 18 per cent to $1.8bn last year on sales little changed at $15bn.

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