AB InBev Faces Challenges in U.S. and Brazil -- Earnings Preview

By Tripp Mickle

Anheuser-Busch InBev SA is scheduled to announce its fourth-quarter earnings and year-end results before the market opens Thursday. Here's what you need to know.

EARNINGS FORECAST: Net income of $1.37 a share for the fourth quarter is the consensus of analysts surveyed by Thomson Reuters, compared with $1.46 reported a year earlier.

REVENUE FORECAST: Revenue of $11.86 billion is forecast, compared with $11.71 billion reported a year earlier.

WHAT TO WATCH:

U.S. Beer: Challenges in the U.S., the company's largest market, weighed on third-quarter results at AB InBev as sales volumes fell 3.7%. But there's optimism in the beer business that the combination of low gas prices and an improving job market will boost sales of American lagers like Bud Light and Budweiser will increase in 2015. Fourth quarter sales volumes will provide some guidance as to whether or not AB InBev will benefit from those economic trends.

M&A Activity: Speculation continues to mount that AB InBev is preparing to buy SABMiller, the world's second-largest brewer. AB InBev CFO Felipe Dutra said in October that "M&A remains part of our DNA" but added that the company doesn't feel pressured to do a deal. Its most recent acquisitions -- Oriental Breweries in South Korea and Grupo Modelo in Mexico -- are expected to boost results for the fourth quarter and calendar year.

Bumps in Brazil: The Brazilian beer business, where AB InBev has about 70% market share, slumped late last year. Beer production volumes increased just 0.4% during the fourth quarter compared with a 6% increase for soft drinks, according to Brazilian government data cited by Bernstein Research. The Brazilian real also lost value against the strengthening U.S. dollar, which should hurt results.