Stella Artois maker Anheuser Busch's stock could further fall - analysts

Anheuser Busch Inbev NV (NYSE:BUD) tumbled nearly 6% on Thursday to a near two-week low. The pullback, triggered by an unexpected development, erased nearly all of the stock’s March gains.

Why did Anheuser Busch stock fall on Thursday?

The notable drop in Anheuser Busch stock occurred in Thursday’s premarket, shortly after trading in the brewer’s shares on the Brussels stock exchange was halted, as announced by Belgium's Financial Services and Markets Authority (FSMA).

The suspension, which was lifted at 13:00 GMT, came following news of Altria Group 's (NYSE:MO) decision to significantly reduce its stake in the company behind Budweiser.

Altria announced on Wednesday its plan to reduce its roughly 10% stake in the Stella Artois maker by selling around 35 million shares.

The proceeds from this sale are earmarked for Altria's own stock repurchase program.

Moreover, the deal grants underwriters the option to acquire an extra 5.25 million shares of Anheuser Busch stock. Based on its Wednesday closing price of $64.55, the transaction was valued at approximately $2.26 billion.

Altria Group's divestiture will decrease its stake in AB InBev to about 8.1%, or potentially to 7.8% should the underwriters opt to acquire more securities.

The transaction is expected to temporarily pressure Anheuser Busch’s stock, but according to James Edwardes Jones, an analyst at RBC Capital Markets, it is of "minimal longer-term significance" and comes as no surprise.

Anheuser Busch stock forecast

Commenting on Altria’s plan to repurchase more shares via funds it would secure from reducing its AB InBev stake, Jefferies analyst said these buybacks would likely be planned for fiscal year 2024.

“Altria has today confirmed as such, with an incremental $2.4bn for FY24, to take total FY24 buyback to $3.4bn. Altria also raises FY24 guidance to 2%-4.5% (before 1%-4%). The rationale behind the move explained as cash savings from the elimination of future dividends,” the analyst said in a note.

However, the move also increases the chances of further stake reductions in the Stella Artois maker for Altria.

It reintroduces the speculation that the tobacco maker may continue to reduce its holdings in Anheuser Busch stock, or potentially divest its entire stake at some point in the future.

“We think this remains likely over the longer term,” the analyst wrote.

“One, it is possible that we see additional small stake sales such as this one for more buybacks and savings on future dividends, especially while the multiple arb remains sizeable, and with MO currently yielding 10%, and ABI yielding around 1%,” they added.

Secondly, Altria’s willingness to sell Anheuser Busch stock underscores its commitment to boosting shareholder value.

A full sell-off is seen as a possibility, especially if it facilitates significant mergers and acquisitions, with AB InBev serving as a key financial resource, the analyst explained.

Additional stake reductions would likely put more pressure on the stock.

What beers does Anheuser Busch make?

Formed through the merger of Belgium-based InBev and American brewer Anheuser Busch in 2008, Anheuser Busch InBev is the largest brewer in the world.

The company is renowned for producing some of the world's leading beer brands, including Budweiser, Stella Artois, and Corona.

Additionally, the company offers a diverse portfolio of other well-known brands like Beck's, Leffe, and Hoegaarden.