Ever since beverage giant Anheuser-Busch InBev (BUD) signed a deal worth more than $100 billion this month to acquire SABMiller (SBMRY) , brewery stocks have gained momentum, from mammoth players to lesser-known stocks.
We have selected a trio of high-performing brewery stocks that should get a big bump during the holidays, when food and beverage consumption tends to increase. In general, these stocks tend to be "steady Eddie" sshares that make good long-term holdings for any core portfolio or retirement investment plan.
SAB Miller stock has reaped a windfall in the past 12 months, largely as a result of the Anheuser-Busch InBev deal. The London-traded shares have gone to the recent level of 4,090 pence from a low of 2,773 pence, while the U.S.-listed ADR, shown above, has soared to around $60 from a low of $43.92.
Under the terms of the deal, which both companies have agreed to, Anheuser-Busch will pay 44 pounds in cash, or 4,400 pence, for each share of SABMiller. That's a 50% premium to the stock's adjusted price in mid-September. Since the deal was announced, the stock has climbed much higher, reducing the discount to the cash offer, but the stock price is still significantly lower than the offer price.
(There is also a "partial share alternative" consisting of 0.483969 unlisted shares of Anheuser Busch and 3.7788 pounds cash, but it was aimed at SABMiller's two largest shareholders. This was valued at 39.03 pounds on Oct. 12 and was designed to help these shareholders avoid a large tax bill on the sale of their stock.)
The deal is expected to be completed in the second half of 2016. If it goes through, it means existing SABMiller shareholders will sell their shares at a 7.6% gain from existing levels. The wild card in this is opposition to the deal from regulators worried the combined company would have too large a share of the world's beer market.
2. Molson Coors (TAP)
Molson Coors is looking bigger, stronger and better than ever before, as it recently announced that it would purchase SABMiller's 58% stake in the MillerCoors joint venture, giving Molson Coors full control of the business.Direct benefits accruing to Molson from the deal include about $4.7 billion in additional revenue and more than $1 billion in incremental earnings before interest, taxes, depreciation and amortization. In fact, Molson's cash earnings are expected to get a boost of more than 25% in the first full year of operations after the deal is consummated.
Molson Coors will acquire full ownership of the Miller brands outside the U.S. and retain the rights to all of the brands currently in the MillerCoors portfolio for the U.S. market, including Redd's and leading brands like Peroni and Pilsner Urquell.
Although smaller in size compared with market leaders such as Anheuser Busch and SABMiller, the company's earnings per share are robust. On average, analysts estimate the company's EPS will rise to $3.89 next year from 3.81 this year, according to Yahoo Finance, even though the company's earnings per share are expected to fall this year.
More importantly Molson has delivered positive earnings surprises in its last three quarterly releases.
Molson has a 12-month trailing price-to-earnings ratio of 41 and a one year forward P/E of 24, which makes it an attractive buy.
The writing on the wall is clear, despite the flattish revenues in the near term (at $41 billion levels), Molson should see higher earnings, significant tax benefits in the U.S. and substantial benefits from operational synergies once it gains total ownership of Miller Coors in the latter half of 2016. This is the right stock if you're an investor with a wealth-building strategy designed for the long haul.
3. Compañia Cervecerias Unidas S.A. (CCU)
Compañia Cervecerias Unidas, through its subsidiaries, owns and operates brewing facilities primarily in Chile. Also known as United Breweries, its third-quarter results exhibit a clear purpose: facing the competition on its home turf from Anheuser Busch InBev.
The company's had a smart run of late. In the quarter ending Sept. 30, net income grew to $20.7 million from $14.9 million a year earlier. The company's brand-building and aggressive marketing strategy contributed to its consistent performance despite the Chilean economic slowdown and a depreciated peso. Further, its higher market shares in Argentina, Paraguay and Uruguay inspires confidence for the extension and maintenance of its international business prospects.
In the short term, Compañia's wine exports bring in precious dollars (to reinvest in growth), while continuing operational efficiencies help sustain its brand-building and margin improvements in the long-term, as recently indicated by CEO Patricio Jottar.
These growth stocks are just the ticket for long-term investors. Are you worried that you won't have enough money in retirement? To make sure that you're making the right investment moves for a prosperous future, download a free copy of our new special report: Your Ultimate Retirement Guide.