Anheuser-Busch Earnings Jump 13%, Topping Estimates

However, the stock mysteriously fell, despite the good results.
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Anheuser-Busch

(BUD) - Get Report

today said its third-quarter earnings rose 13%, exceeding Wall Street's expectations.

For the quarter ended Sept. 30, net income rose to $462 million, or 97 cents a diluted share, from $408 million, or 84 cents a share, a year earlier. That was 2 cents over the 95-cent consensus estimate of analysts polled by

First Call/Thomson Financial

.

Gross sales rose to $3.76 billion from $3.65 billion a year ago. Net sales, excluding excise taxes, rose to $3.22 billion from $3.12 billion a year ago.

The cause: increased domestic revenue per barrel and higher domestic beer volume. "That pricing number is key because it gives them tremendous earnings leverage in the industry," said John Faucher, an analyst at

J.P. Morgan

. That number should come in at 2.5% for the year, he indicated. Faucher has a buy rating on the stock. J.P. Morgan has done some recent debt underwriting for the company and J.P. Morgan's chairman is a member of the Anheuser-Busch board.

Meanwhile, international beer volume was up 3.3% for the quarter, despite continued weakness in Asia and slower U.K. sales. (That figure excluded the company's investment in Mexico-based

Grupo Modelo

, the producer of Corona, now the No. 1 imported beer in the U.S.)

International beer operations, excluding Modelo, are expected to report a full-year operating loss for 1999 in the range of $10 million to $20 million. At least half of that loss will be due to the termination of a joint venture in Brazil and one-time costs related to the August 1999 recall of bottles in Europe.

The company said its equity income, net of tax, more than doubled to $45 million from $20 million a year earlier, reflecting its 50.2% ownership in Modelo.

In a statement, August Busch 3rd, chairman and president, attributed Anheuser-Busch's healthy earnings growth to "improving demographics, high-capacity utilization and an improved pricing environment."

Still, Anheuser-Busch's stock fell 1 1/2, or 2%, to close at 67 7/8. Analysts said they were confounded by the fall since the earnings report was strong. Some estimated it could have something to do with investors rotating out of domestic plays and into global growth stocks.

Looking ahead, Busch said, "The combination of favorable domestic beer pricing and volume trends provides a positive outlook for achieving our double-digit earnings per share growth objective in 2000."

Martin Romm of

Credit Suisse First Boston

has a positive outlook on the company, commenting, "The company is really firing on all cylinders." Romm rates Anheuser-Busch a strong buy and has not participated in any underwriting for the company.

Also today, Anheuser-Busch announced that its packaging group had reached a preliminary agreement to form a joint venture with

Consumers Packaging

. The venture will acquire and reopen a glass manufacturing plant in Houston that will supply bottles to Anheuser-Busch, which just happens to be the largest user of glass containers in North America.