May 7, 2014, 10:20 A.M.
The world’s largest brewer AmBev (ABEV) reported better-than-expected first-quarter sales. Revenue rose 8.9% to $4.06 billion, ahead of the consensus $4.05 billion forecast.
AmBev’s sales growth was driven by Brazil. Bloomberg reports:
Brazilian volume soared 11 percent due to good weather and lower food inflation, which freed disposable income for consumers. The Budweiser maker expects a return to growth in the country, where it controls two-thirds of the market, aided by its sponsorship of this year’s soccer World Cup.
AmBev reported earnings per share of $0.07, weaker than the expected $0.08. But it was mainly driven by higher finance costs, noted Nomura Securities.
AmBev maintained its second-quarter guidance, even though Brazil last week announced a surprise beverage tax hike starting June 1.
We should give AmBev the benefit of the doubt, because the company is good at optimizing price increases, commented J.P. Morgan last week.
But the market is not buying into AmBev’s Q1 numbers. Shares of AmBev are down 1.6% this morning. “The bigger issue is the outlook for year-end into 2015, given the tax hike”, noted Morgan Stanley in a research note published today.