Brokers: UBS bullish but with reservations on A-B Inbev

UBS is somewhat equivocal in its enthusiasm for Belgian beer conglomerate Anheuser-Busch Inbev.

This Bud is for UBS

Swiss bank UBS is bullish on Anheuser-Busch InBev SA (NYSE:BUD) ahead of the brewing giant’s second quarter results on Friday.

That’s despite the bank going for like-for-like (LFL) growth in underlying earnings (EBITDA) of 5.8% that is lower than the market’s consensus view of +6.1%. It predicts clean EBITDA of US$4,057mln, which is 1.3% below the Street’s view.

UBS is in line with the market’s view in predicting LFL sales growth of 5.7%, while it is also on the same page with its forecast of normalised earnings per share of US$1.08.

“We are below consensus on EBITDA given our expectations of rising marketing costs as a percentage of sales and continued capacity constraints ahead of new capacity coming in early 2017,” UBS said.

The shares currently trade at just under US$122; UBS is a buyer all the way up to US$133.

Coke goes flat

If soft drinks are more your thing, Jefferies has that covered with The Coca-Cola Company (NYSE:KO).

The broker has shaved a dollar off its former price target of US$46 after lowering its earnings per share forecasts for 2016 through to 2018.

The changes in estimate follow the fizzy drinks maker’s soft second quarter figures and downwardly revised LFL sales guidance.

The broker had expected Coca-Cola to talk down the guidance, but not as much as it did.

Any hope for a return to the company’s LFL sales growth of 4%-5% now move to next year, the broker said.

“We are edging down our FY16-18 EPS by 2-3% to US$1.89/US$1.95/$2.10, expect the stock to remain range bound near-term,” said Jefferies, which sticks with its ‘hold’ rating.

Internet giants maraud on

The time to buy Apple Inc (NASDAQ:AAPL) is now, according to Hilliard Lyons, which has moved from “long-term buy” to “buy” after the iPhone maker’s results on Tuesday evening.

Meanwhile, Monness Crespi & Hardt no longer likes Facebook Inc (NASDAQ:FB), despite the social media giant topping expectations with its second quarter results.

Revenue came in at US$6.44bn versus expectations of US$6.02bn, while net income rose to US$2.05bn from US$719mln the ear before.

Analysts had expected earnings per share of 82 cents but Facebook topped that by 15 cents, none of which stopped the broker from shifting to a neutral stance.

Wedbush Securities, however, reiterated its “outperform” rating and raised its 12-month price target of US$162, and raised its earnings estimates to reflect robust growth reported by the web phenomenon.

Facebook has a virtually insurmountable competitive advantage with over 1.7 billion monthly active users and over 1.1 billion daily active users, and has succeeded in convincing 3 million advertisers that its captive audience will yield returns on advertising investment,” the broker said.

It expects Facebook to continue its rapid growth overseas, and to squeeze some income out of its Instagram, WhatsApp and Messenger assets over the coming years.

“Investments in new initiatives position the company for long term growth, and we believe that these initiatives will drive growth over the next decade. In summary, we believe Facebook is a great company, period,” Wedbush said.

Fed thoughts

French bank Societe Generale has been reading the runes after the Federal Reserve’s statement yesterday.

“The Fed moved a step closer to reintroducing the balance of risks statement, keeping them on track for a rate hike later this year,” it declared.

“That being said, officials have backtracked on rate hike expectations before, as recently as the June meeting, so we continue to think they will err on the side of caution and wait to raise rates until next year,” it added.

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