Ambev S.A (NYSE:ABEV) is one of the Best Low Cost Stocks to Buy According to Analysts. Wall Street has a mixed opinion on Ambev S.A (NYSE:ABEV) after the company missed revenue estimates for its fiscal second quarter of 2025. The company delivered $3.59 billion in revenue, which grew around 2.65% year-over-year but fell short of expectations by $250.95 million. The EPS of $0.03 stayed in line with the consensus. Management noted that its total organic volumes decreased by 4.5% year-over-year due to indust ...

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Core Insights - The article emphasizes the importance of value investing in companies with solid long-term potential, highlighting a strategic approach for individual investors [1]. Group 1 - The individual investor has over five years of experience in personal investing and holds a PhD in Economics, indicating a strong educational background [1]. - The investment strategy focuses on identifying value companies, which are expected to perform well over the long term [1]. - The investor shares knowledge and analysis to support the community of individual investors, reflecting a commitment to education and empowerment [1]. Group 2 - There is a clear disclosure that the analyst has no current stock or derivative positions in any mentioned companies, ensuring transparency [2]. - The article expresses personal opinions and does not constitute financial advice, reinforcing the individual nature of the insights provided [2]. - The disclosure also states that the analyst is not receiving compensation for the article, which adds credibility to the analysis presented [2].

Financial Performance - The company reported a high single-digit organic EBITDA increase with a margin expansion of 110 basis points, despite soft interest volumes in several markets due to adverse weather conditions [6][9] - EBITDA grew double digits with a margin expansion of 160 basis points, and EPS increased by 6.5% [7][9] - Cash flow from operating activities grew 4%, reaching BRL3 billion, despite a 9.2% decline year-over-year due to volume dynamics [27][28] Business Unit Performance - In Brazil, beer volumes declined by 9%, primarily due to unfavorable weather, with June accounting for over 60% of the volume impact [15][16] - Premium and super premium brands in Brazil grew mid-teens, gaining market share, while core brands sustained almost 30% of volumes [16][18] - In Argentina, beer volumes returned to growth after seven quarters, with the premium segment growing double digits [19] Market Dynamics - The company faced a mid-single-digit industry decline attributed to adverse weather, with 70% of the decline explained by weather conditions [36][37] - The core segment's decline was in line with low teens due to higher sensitivity to industry performance and revenue management decisions [40] - In Canada, volumes grew by 0.8%, driven by a growing Ontario industry and strong performance in the non-alcoholic beer segment [20] Strategic Direction - The company emphasized a disciplined focus on cost efficiency, which offset non-commodity cost inflation, resulting in significant savings [14] - The growth strategy includes leading and growing the category, digitizing and monetizing the ecosystem, and optimizing business operations [8][10] - The company is confident in its ability to navigate cost pressures and maintain brand equity, with a focus on premiumization and digital engagement [29][42] Management Commentary - Management expressed confidence in the company's positioning for the second half of the year, citing improved weather conditions and easing consumer price relativity [42][43] - The company remains focused on sustainable value creation through disciplined capital allocation and operational efficiency [28][29] - Management highlighted improvements in employee engagement and brand equity, reinforcing confidence in future performance [29][99] Other Important Information - The Board of Directors approved an intermediary dividend payout of BRL2 billion, totaling BRL6 billion declared this year [7][8] - The company reported a significant increase in marketplace GMV, driven by partnerships and improved customer engagement [10][66] Q&A Session Summary Question: Volume performance in Brazil and future outlook - Management noted that the mid-single-digit industry decline was largely due to adverse weather, with no structural change in consumer demand expected [36][37] - Confidence in the second half is based on improved weather conditions and initial signs of easing consumer price relativity [42] Question: Cost management initiatives - Management emphasized ongoing cost optimization efforts, including SKU rationalization and improved distribution expenses [44][45] Question: Dynamics between on-trade and off-trade channels - Management indicated that revenue management initiatives were implemented across all segments, with a focus on maintaining pricing aligned with inflation [56][57] Question: Digital marketplace performance - The digital marketplace saw a 90% growth in GMV, driven by partnerships and increased customer engagement [65][66] Question: Brand equity and Skol strategy - Management highlighted improvements in brand power metrics and ongoing adjustments to the Skol brand strategy [99][100]

Financial Data and Key Metrics Changes - The company reported a high single-digit organic EBITDA increase with a margin expansion of 110 basis points despite soft interest volumes in several markets due to adverse weather conditions [5][6] - EBITDA grew double digits with a margin expansion of 160 basis points, while EPS increased by 6.5% and cash flow from operating activities grew by 4% [6][20] - The Board of Directors approved an intermediary dividend payout of BRL2 billion, totaling BRL6 billion declared this year [6] Business Line Data and Key Metrics Changes - Premium and super premium brands delivered low teens growth, expanding in seven out of the top 10 markets, while the balanced choice portfolio grew in the low 20s [7][15] - In Brazil, beer volumes declined by 9% primarily due to unfavorable weather, but premium and super premium brands grew mid-teens, gaining market share [14][15] - The core segment volumes declined by low teens, reflecting higher sensitivity to industry performance and revenue management decisions [15][40] Market Data and Key Metrics Changes - In Brazil, the beer industry experienced a mid single-digit sellout decline, largely attributed to adverse weather conditions, with 70% of the decline explained by weather [36][39] - Argentina saw a sequential improvement in beer volumes, returning to growth after seven quarters, while the premium segment grew double digits [16][17] - In Canada, volumes grew by 0.8%, offsetting a soft industry affected by colder temperatures [18] Company Strategy and Development Direction - The company is focused on executing a disciplined growth strategy with an emphasis on revenue and cost management [5][6] - The digital ecosystem is seen as a bridge between core business and new revenue streams, with significant growth in the marketplace GMV [9][65] - The company aims to optimize its business through cost efficiency, with a disciplined focus on reducing non-commodity cost inflation [13][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current challenges, citing improved brand equity and a strong portfolio [29][30] - The company anticipates a significant improvement in performance in the second half of the year, driven by better weather conditions and easing consumer price relativity [42][80] - Management emphasized that there is no structural change in consumer demand in Brazil, and they remain optimistic about future growth opportunities [36][42] Other Important Information - The company has reduced the number of SKUs by around 10% to increase productivity and manage costs effectively [23][92] - The effective tax rate for the quarter was 18.4%, a decrease from 28.6% in the previous year, driven by non-recurrent events and favorable court rulings [25][26] Q&A Session Summary Question: Concerns about volume performance in Brazil - Management explained that the volume decline was primarily due to adverse weather, with 70% of the decline attributed to this factor, and expressed confidence in recovery in the second half of the year [36][42] Question: Insights on cost management and future initiatives - Management highlighted ongoing efforts in cost optimization and SKU rationalization, indicating that there is still room for further efficiency improvements [43][44] Question: Dynamics between on-trade and off-trade channels - Management noted that revenue management initiatives were implemented across all segments, with a focus on maintaining pricing aligned with inflation while managing cost inflation [55][56] Question: Digital marketplace performance - The company reported a 90% growth in marketplace GMV, driven by partnerships and an increase in customer engagement [64][65] Question: Update on brand equity and Skol strategy - Management provided insights into brand equity improvements based on tracking metrics and discussed ongoing efforts to revamp the Skol brand, indicating positive trends in distribution and support [99][102]

Financial Performance - Normalized net income increased by 15% in 2Q25, reaching BRL 2.83 billion, compared to BRL 2.46 billion in 2Q24[59, 67] - The company declared approximately BRL 60 billion in dividends year-to-date[16] - Cash and cash equivalents at the end of June 2025 stood at BRL 164 billion, a 4% increase year-over-year[69, 71, 73, 75, 77] Business Unit Performance - Brazil Beer's net revenue per hectoliter increased by 62%, despite an 89% decrease in volume[39] - Brazil NAB (Non-Alcoholic Beverages) experienced a 02% increase in volume and a 65% increase in net revenue per hectoliter[43] - LAS (Latin America South) saw a 29% increase in volume and a 194% increase in net revenue per hectoliter[45] - Canada achieved its best 2Q EBITDA growth, with volume up by 08% and net revenue per hectoliter up by 20%[51] Strategic Initiatives & Digital Platforms - Bees Marketplace GMV (Gross Merchandise Volume) increased by 90%, driven by 3P (third party) partnerships, reaching BRL 74 billion annualized GMV[24] - Zé Delivery GMV grew by 7%, with an 11% increase in average order value[24] Cost & Efficiency - The company achieved 22x operational leverage through cost and expense management initiatives[32] - A 10% reduction in SKU (Stock Keeping Unit) numbers was achieved[57]

Core Viewpoint - The article emphasizes the importance of value investing as a strategy to identify strong stocks, particularly highlighting Ambev (ABEV) as a notable example of a potentially undervalued stock with strong earnings outlook [2][6]. Group 1: Value Investing - Value investing is a preferred method for finding strong stocks across various market conditions, relying on traditional analysis of key valuation metrics [2]. - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly focusing on those with high grades in the "Value" category [3]. Group 2: Ambev (ABEV) Analysis - Ambev (ABEV) currently holds a Zacks Rank of 2 (Buy) and has a Value grade of A, indicating strong potential for value investors [4]. - ABEV's current P/E ratio is 13.38, which is lower than the industry average of 15.57, suggesting it may be undervalued [4]. - The stock's Forward P/E has fluctuated between 9.82 and 14.38 over the past year, with a median of 12.90 [4]. - ABEV has a PEG ratio of 2.48, which is comparable to the industry average of 2.63, indicating a reasonable valuation considering its expected earnings growth [5]. - Over the last 12 months, ABEV's PEG ratio has ranged from 2.39 to 7.28, with a median of 5.00 [5]. - The combination of these metrics suggests that Ambev is likely undervalued and stands out as one of the strongest value stocks in the market [6].

Group 1 - The recommendation to buy Ambev (NYSE: ABEV) shares is reiterated following the release of its first-quarter 2025 results [1] - The article serves as a continuation of the initial coverage published on May 8, 2024, indicating ongoing analysis and insights into the company's performance [1] - The analyst has over 5 years of experience in equity analysis in Latin America, providing in-depth research and insights for informed investment decisions [1]

Core Insights - Steven Cress is a key figure in quantitative strategy and market data at Seeking Alpha, contributing to the development of the platform's quantitative stock rating system and analytical tools [1][2][3] - The Seeking Alpha Quant Rating system aims to interpret data for investors, providing insights that save time and enhance investment decision-making [1][2] - Cress has a strong background in investment research, having founded CressCap Investment Research and Cress Capital Management, and previously worked at Morgan Stanley and Northern Trust [3][4] Company and Industry Summary - Seeking Alpha utilizes a data-driven approach to investment research, focusing on removing emotional biases and simplifying complex analyses through algorithms and technologies [2] - The platform offers a systematic stock recommendation tool called Alpha Picks, designed for long-term investors to build high-quality portfolios [1][2] - With over 30 years of experience in equity research and portfolio management, Cress is well-equipped to address various investment topics, enhancing the credibility of Seeking Alpha's offerings [4]

Core Viewpoint - Investors are evaluating Ambev (ABEV) and Constellation Brands (STZ) for potential undervalued stock opportunities in the Beverages - Alcohol sector [1] Group 1: Zacks Rank and Earnings Outlook - ABEV has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while STZ has a Zacks Rank of 4 (Sell) [3] - The Zacks Rank system emphasizes companies with positive earnings estimate revisions, suggesting ABEV is likely to see greater improvement in its earnings outlook [3][7] Group 2: Valuation Metrics - ABEV has a forward P/E ratio of 14.29 compared to STZ's forward P/E of 14.77, indicating ABEV may be more attractively priced [5] - ABEV's PEG ratio is 3.03, while STZ's PEG ratio is significantly higher at 8.87, suggesting ABEV offers better value relative to its expected earnings growth [5] - ABEV's P/B ratio is 2.42, compared to STZ's P/B of 4.74, further supporting ABEV's valuation advantage [6] - Based on these metrics, ABEV earns a Value grade of B, while STZ receives a Value grade of D [6]