NEW YORK (CNN/Money) -
Anheuser-Busch had been the life of the party on Wall Street for the past decade, regardless of market gyrations and economic slowdowns. Heading into the beginning of 2004, the stock had gained ground every year since 1994.
But imbibing too much often leads to the eventual hangover. To that end, Anheuser Busch's winning streak ended last year as shares slipped 2 percent.
The company is expected to report fairly watered down results for 2004 on Wednesday. And with a merger brewing between two top rivals Coors and Molson, many are asking if another decline is on tap for Anheuser-Busch's stock in 2005.
St. Louis-based Anheuser-Busch (Research) is the nation's largest brewer, with a market share just shy of 50 percent in the U.S., and produces more than 30 different beers, including Budweiser, Bud Light, Busch and the low-carb Michelob Ultra.
Although you undoubtedly know these brands already, the brewer continues to pursue an aggressive advertising campaign – it's bought up 10 of the 58 30-second spots during Sunday's Super Bowl, at $2.4 million a pop.
But there's one commercial you won't see on Sunday. Anheuser-Busch canned what would likely have been one of the more controversial advertisements for this year's big game, a spot that poked fun at last year's infamous "wardrobe malfunction" that exposed Janet Jackson's breast during the half time show. The clip is available on Budweiser's web site though.
Still, some think that a little bit of controversy is just what this company needs to shake things up and rejuvenate sales. Sure, Anheuser-Busch has dominated the market during the century and a quarter since Adolphus Busch introduced Budweiser. But to paraphrase a lyric from a song by the aforementioned Ms. Jackson, what has Bud done for the Street lately?
Sales aren't too frothy
Wine and distilled spirits continue to gain a bigger share of the alcoholic beverage market, at the expense of the beer industry. Growth in the U.S. has been relatively stagnant for the past few years.
The company has already said that beer shipments to wholesalers in the U.S. increased just 0.4 percent in 2004. And analysts expect Anheuser-Busch to report full year sales growth for 2004 of $14.9 billion, up 5 percent from a year ago. Earnings are predicted to increase 10 percent to $2.73 a share.
Anheuser-Busch has said that 2005 earnings should be up about 7 percent to 10 percent, but the consensus estimate of $2.93 a share is at the low end of this growth range. The company also warned that rising commodity costs could hurt profit growth in 2005. And sales in 2005 are only expected to increase 4 percent, to $15.5 billion.
The company has planned to raise beer prices in select markets and that may help lift sales somewhat, as could the roll out of aluminum beer bottles for certain brands. But Anheuser-Busch clearly needs to find some new growth opportunities in order to get Wall Street to belly up to the bar and order some more BUD stock.
New products and international growth on tap
Anheuser-Busch is banking on new products and international expansion to give it a boost. The company announced last week that it will begin selling a new beer, called Budweiser Select, at the end of February. Bud must have high hopes for it: the beer will be featured during an ad in Sunday's Super Bowl.
The company also recently introduced a new beverage, dubbed "B-to-the-E" (the E stands for something "extra") targeted to men and women in their 20's. The new drink is essentially Bud Light infused with caffeine, ginseng and guarana and is aimed to compete with both other alcoholic drinks as well as beverages like Red Bull.
And Anheuser-Busch is aggressively expanding in international markets, where there is higher growth potential. Mexico continues to be the company's largest export market, with double-digit volume growth for Budweiser and Bud Light during the past few years. Anheuser-Busch has also been aggressively pursuing partnerships in Canada, Ireland, Spain, Italy and Argentina.
But China could be where the company has the most to gain. Last year Anheuser-Busch acquired Harbin Brewery Group, the fourth-largest brewer in China and producer of the Hapi beer brand.
Happy hour is over
Despite these growth plans, most analysts aren't optimistic about the stock's near-term prospects. According to First Call, 13 of the 17 analysts covering the stock have it rated a "hold."
To be sure, shares aren't too expensive, trading at 16.7 times 2005 earnings estimates. That's a discount to Boston Beer Company (Research), the specialty brewer known for its Samuel Adams lines of beers.
But Anheuser-Busch continues to trade at a premium to Coors (Research), which has a P/E of just 14.1 times 2005 earnings estimates, even though shares of Coors gained nearly 37 percent last year. What's more, Coors is expected to post slightly higher growth than Anheuser-Busch in 2005, with analysts predicting an 8 percent increase in sales and nearly 12 percent gain in earnings.
Coors shareholders vote Tuesday on the potential merger with Molson, Canada's largest brewer. Last week, Molson shareholders voted overwhelmingly in favor of the plan. And if the deal does go through, Anheuser-Busch could find itself with an even tougher competitor in its most important market.
So add it all up and you've got an industry marked with lackluster growth prospects, increased competition and rising commodity costs and marketing expenses. It's enough to make you want to cry in your Bud...not buy shares of Anheuser-Busch.