This Bud's for you

Anheuser-Busch will be pushing its core Budweiser and Bud Light brands through 2008 in ads like the "Rock, Paper, Scissors" spot from the 2007 Super Bowl.

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NEW YORK (CNNMoney.com) -- It's almost time for the Super Bowl, and you know what that means... lots of Anheuser-Busch ads. And while a high-profile spot might get you to purchase a few cold Buds, what about shares in the company itself?

Anheuser-Busch (BUD, Fortune 500) could be a safe haven during this tumultuous time for the economy and stock market. The brewer has a 50 percent market share in a stable industry, ownership of its own packaging assets (which reduces costs and boosts quality control), and marketing clout.

The company's performance has been amazingly consistent. A-B has only missed quarterly consensus earnings estimates four times in the past ten years, according to Marc Greenberg of Deutsche Bank.

The company is scheduled to report its fourth-quarter results on January 31. Analysts expect sales of $3.65 billion, up 6.5 percent from a year ago, and earnings of 32 cents per share, a 28 percent increase from the same period last year

In times of economic uncertainty, brewers like A-B are often seen as an insulator against a plunging market. But is Anheuser-Busch really "recession-proof?"

Taking advantage of Coors-Miller deal. Some analysts think the merger of Anheuser-Busch's two domestic rivals could spell opportunity for the company.

SABMiller and Molson Coors, which own the nation's number 2 and 3 brewers, are planning to combine their U.S. operations some time in mid-2008. While the merger may put the two competitors in a better position to challenge A-B over the long haul, no merger is without its rough edges.

Plant shutdowns and other related bumps could spell opportunity for the King of Beers, which has the potential to gain more market share during the transition, analysts said.

For this reason, Wachovia analyst Jonathan Feeney wrote in a recent report that he thinks A-B's stock could rise while Coors and Miller integrate their merger.

It will be key for A-B to take advantage of any merger hiccups since products from Miller and Coors have been eroding the sales growth of Budweiser and Bud Light, said Jack Russo of Edward Jones. The Bud Light brand has been particularly affected, taking hits from Miller Lite and Coors Light.

To counter this competition, Goldman Sachs analyst Judy Hong expects A-B to spend heavily on marketing through 2008 to maintain and boost its market lead. And during the Super Bowl on February 3, the company will be devoting most of its television ad spots to Bud Light.

Price hikes to boost profits Since the beer industry's brief downturn in 2005, A-B has taken steps to operate its 12 U.S. breweries at maximum efficiency, according to Feeney. In May of last year, Anheuser-Busch began a brewery productivity program called Blue Ocean designed to squeeze more performance out of its existing facilities.

But this means there aren't many more costs to cut in order to boost profits. Instead, A-B is probably going to have to rely on price increases to boost sales and profits in the U.S., which could be a risky move during a time of economic weakness.

A-B said it would begin raising prices on U.S. beer through the early part of 2008. Pricing increases could boost profits, but the company will need to avoid losing customers who simply may not have enough as much cash to spend on beer in the months ahead.

Yet, with rising commodity costs, especially the cost of malting barley, which has increased about 40 percent through 2007, price increases are unavoidable, said Russo.

Still, beer sales are not likely to take a huge hit in an economic downturn since it's hardly a big ticket item.

Drafting up international growth. What's more, A-B is continuing to tap (pardon the pun) international markets as a new growth opportunity.

Although international sales make up just 7 percent of A-B's total revenue, beer shipments outside of the U.S. are growing more dramatically than domestic beer sales.

The company has also been expanding its presence in other countries through licensed and wholly-owned overseas breweries and exports.

Most of A-B's current international growth is being driven by its 50 percent ownership in Grupo Modelo, which commands 57 percent of Mexico's beer market, and which also exports the popular Corona brand to the United States.

A-B also owns 27 percent of Tsingtao, one of the leading brewers in China, a market which is one of the largest and fastest growing in the world. A-B needs these international growth opportunities, says Don Yacktman, president of the Yacktman Fund, which owns shares of Anheuser-Busch.

Great value in tough times JPMorgan analyst John Faucher says A-B is struggling too much to grow its core brands, and he doesn't see as much potential earnings growth for the company through 2008 to warrant enthusiasm.

Analysts expect sales to grow only 4 percent in 2008 to $17.29 billion and that earnings per share will only increase about 10 percent to $3.09.

Hong of Goldman Sachs believes A-B's stock, though not expensive, isn't a good bet since profits could take a hit due to the cost of this year's marketing surge.

She added that the stock does trade at a slight premium to its top rival. Anheuser-Busch is trading at about 16 times year-end 2008 earnings estimates, compared to Molson Coors (TAP, Fortune 500), which is valued at around 14 times estimates.

And Wachovia's Feeney doesn't see the company's shares gaining much more than 6 to 10 percent over the next twelve months.

However, in this rocky market, a 10 percent increase is nothing to sneeze at...especially since the stock also offers investors steady income as well. A-B has increased its dividend every year for 31 years, according to Edward Jones. And Greenberg of Deutsche Bank expects a dividend increase of about 8 percent in mid-2008.

Yacktman adds that even if the stock is trading at a premium to Coors, it still is valued a reasonable price. In fact, it trades at a discount to other consumer companies that are thought to be "recession proof" such as Coke (KO, Fortune 500), which is trading at about 20 times 2008 estimates and Procter & Gamble (PG, Fortune 500), which is trading at about 19 times fiscal 2008 estimates..

And while the company's slow growth may not be enough to tempt some investors, A-B's consistency will likely be a good hedge against economic turmoil.

Analysts referred to in this story do not own stock in Anheuser-Busch. However, banks mentioned may maintain an investment banking relationship with A-B. The Yacktman Fund owned 90,000 shares of Anheuser-Busch as of December 31st, 2007.