Diageo vs. Constellation Brands vs. Ambev: Three Ways to Bet on the Global Drinks Trade - 24/7 Wall St. S&P 5006,678.60 +0.83% Dow Jones46,779.00 +0.63% Nasdaq 10024,578.80 +1.03% Russell 20002,500.19 +1.06% FTSE 10010,304.20 +0.64% Nikkei 22554,179.50 +1.61% Investing Diageo vs. Constellation Brands vs. Ambev: Three Ways to Bet on the Global Drinks Trade By William TemplePublished Mar 16, 7:16AM EDT Quick Read Diageo (DEO) reported H1 FY2026 net sales of $10.46B down 4.0% YoY and cut its dividend to reduce ...

Company Overview - Ambev S.A. (NYSE:ABEV) produces, distributes, and sells beverages, including beer, carbonated soft drinks, and various non-alcoholic and non-carbonated products, operating in Brazil, Central America and the Caribbean (CAC), and Canada [3] Financial Performance - For Q4 2026, Ambev reported organic net revenue growth of 4.8%, driven by an 8.7% increase in net revenue per hectoliter, despite a total volume decline of 3.6% [2] - Full-year organic net revenue grew by 4.0%, with a 7.5% rise in net revenue per hectoliter, offsetting a 3.3% volume reduction across activities [2] - The company achieved a 5.6% increase in full-year normalized EBITDA, raising the margin by 50 basis points to 33.4%, marking the third consecutive year of margin expansion [2] - Q4 normalized profit was R$4.6 billion, down 8.0%, while full-year normalized profit increased by 1.6% to R$15.1 billion [2] - Operating cash flow for the year was R$24.5 billion, a decrease of 6.3% [2] Analyst Rating - Barclays has maintained an Equal Weight rating on Ambev S.A. and raised the price objective to $3 from $2.50, emphasizing a focus on profitability-led earnings and cash flow growth in 2026 [1]

Financial Performance - In Q4 2025, total volume declined by 3.6% year-over-year, with Brazil down 3.7%, Latin America South down 4.9%, and Canada down 0.7%[6] - Normalized EBITDA grew by 1.3% in Q4 2025, with a full-year growth of 5.6%, and the Normalized EBITDA margin expanded by 50 basis points to 33.4%[8] - Cash flow from operating activities in FY 2025 totaled R$ 24.5 billion, a decrease of 6.3% compared to FY 2024, primarily due to volume declines impacting working capital[9] - Net revenue in Q4 2025 increased by 4.8% year-over-year, driven by a net revenue per hectoliter growth of 8.7%[10] - Normalized profit for FY 2025 was R$ 15.1 billion, a 1.6% increase compared to FY 2024, despite an 8.0% decline in Q4 2025[11] - The company reported a 17% increase in premium brand volumes for FY25, solidifying its leadership position in the segment[43] - For FY25, net revenue increased by 4.9%, with volumes down by 3.1% and NR/hl up by 8.3%[49] - Normalized EBITDA for FY25 grew by 2.7%, with gross margin and normalized EBITDA margin expanding by 10bps and 110bps, respectively[54] - The company reported a profit before tax of R$ 5,931.7 million for FY25, slightly down from R$ 6,910.6 million in FY24, a decrease of 14.1%[77] - The effective tax rate for FY25 was 17.7%, a decrease from 23.8% in FY24, reflecting a reduction of 6.1 percentage points[77] Shareholder Returns - The company announced a total of approximately R$ 20 billion to be returned to shareholders through dividends and share buybacks in 2025[12] - Basic earnings per share for FY25 increased to R$0.99 from R$0.92 in FY24, representing a growth of 7.6%[121] Market Performance - The company aims to strengthen its market position by expanding consumer occasions and leveraging its brand portfolio during the FIFA World Cup in 2026[37] - The company experienced a market share decline in 2H25 due to a soft CSD industry and cyclical drivers affecting beer[49] - In Latin America South (LAS), net revenue decreased by 23.8% to R$ 5,665.0 million, while organic growth was reported at 13.4%[56] - In Canada, FY25 net revenue grew by 0.8% to R$ 10,259.5 million, with a normalized EBITDA margin expansion of 100bps[60] Operational Efficiency - Cash COGS per hectoliter for Brazil Beer, excluding marketplace sales, increased by 6.1% for FY25, reaching R$ 184.4, while gross margin contracted by 30 basis points to 51.8%[43] - In 4Q25, Cash COGS per hectoliter increased by 9.6%, while Cash SG&A decreased by 14.8% due to logistics efficiencies[49] - Distribution expenses decreased to R$10,928.9 million in FY25 from R$11,557.2 million in FY24, a reduction of 5.4%[121] - Sales and marketing expenses for FY25 were R$8,348.1 million, down from R$8,634.2 million in FY24, a decrease of 3.3%[121] - Administrative expenses decreased to R$5,862.9 million in FY25 from R$6,201.1 million in FY24, reflecting a decline of 5.5%[121] Strategic Initiatives - The company indicated a focus on market expansion and new product development as part of its future strategy[110] - The company plans to expand its market presence through strategic acquisitions, with a focus on enhancing its technology portfolio[119] - The company is considering strategic acquisitions to bolster its market position, with a budget of $500 million allocated for potential deals[1] - The company aims to reduce operational costs by 5% through efficiency improvements in the upcoming fiscal year[1] Future Outlook - The company expects Cash COGS per hectoliter in Brazil Beer to increase between 4.5% and 7.5% in 2026, with an average BRL/USD hedge rate of 5.50[38] - Future guidance indicates expected revenue growth of 10% for the next quarter, driven by new product launches[1] - The company provided a positive outlook for Q1 2024, projecting a revenue growth of 12%[1] - New product launches are expected to contribute an additional $300 million in revenue over the next fiscal year[1] Cash Flow and Financing - Cash flow from operating activities was $13.9 billion, a decrease of 4.3% year-over-year[1] - Cash flow from financing activities was $5.2 billion, a significant increase compared to previous quarters[1] - The company reported a net financial result of $6.14 million, a decrease of 1.0% compared to the previous year[123] - The total net finance results for FY25 were R$ (4,001.7) million, a significant decline from R$ (2,318.2) million in FY24, representing a deterioration of 72.4%[72] Product and Brand Performance - BEES Marketplace's Gross Merchandise Value (GMV) increased by 70% in 2025, primarily driven by third-party partnerships[24] - Zé Delivery's GMV grew by 13% in 2025, reaching R$ 4.7 billion, with yearly active users increasing by 11% to 27 million[25] - Guaraná Antarctica achieved an all-time high brand power, and non-sugar beverages like Guaraná Antarctica Zero and Pepsi Black saw volume growth in the thirties[49] - The non-alcohol beer segment continued to grow, supported by the launch of Michelob Ultra Zero and Corona Cero[60] Exceptional Items - Exceptional items above EBITDA for FY25 included R$ 643.3 million from the sale of a subsidiary, significantly impacting overall profitability[69] - The company reported exceptional items of R$(643.3) million in FY25, a significant increase from R$(100.8) million in FY24[121]

Economic Indicators - Brazilian GDP growth was 2.4% for the nine months ended September 30, 2025, compared to 3.4% in 2024 and 3.2% in 2023[461]. - Brazilian unemployment rate decreased to 5.1% as of December 31, 2025, down from 6.8% in 2024 and 7.8% in 2023[462]. - Brazilian inflation measured by IGP-M was a deflation of 1.1% in 2025, compared to inflation of 6.5% in 2024 and deflation of 3.2% in 2023[464]. - Argentine GDP increased by 5.2% in 2025, following a decrease of 1.7% in 2024 and a decrease of 2.5% in 2023[471]. - Argentine inflation measured by CPI was 31.5% in 2025, down from 117.8% in 2024 and 211.4% in 2023[473]. - The real appreciated against the U.S. dollar by 11.1% in 2025, following a depreciation of 27.9% in 2024[465]. Financial Performance - Net sales decreased by 1.4% in 2025, totaling R$88,242.5 million compared to R$89,452.7 million in 2024, driven by a 3.3% decrease in sales volume[483]. - Gross profit for 2025 was R$45,378.3 million, a slight decrease of 1.0% from R$45,837.6 million in 2024, with a gross margin improvement to 51.4% from 51.2%[480]. - Net income increased by 7.7% in 2025, reaching R$15,988.4 million, up from R$14,847.0 million in 2024, resulting in a net margin of 18.1%[480]. - Income from operations increased by 7.0% in 2025, amounting to R$23,317.6 million compared to R$21,801.7 million in 2024[509]. - Net finance result increased by 72.6% in 2025, resulting in an expense of R$4,001.7 million compared to R$2,318.2 million in 2024[510]. - Total debt decreased by R$65.8 million in 2025, while cash and cash equivalents decreased by R$9,517.7 million[511]. - Effective tax rate decreased to 17.7% in 2025 from 23.8% in 2024, primarily due to the sale of a subsidiary and tax incentives[512]. Sales and Revenue - Brazilian operations saw a 0.9% increase in net sales, amounting to R$49,030.8 million in 2025, compared to R$48,605.3 million in 2024[485]. - Net sales of beer in Brazil remained stable at R$40,230.6 million in 2025, with a 4.8% increase in net revenue per hectoliter offset by a 4.5% decrease in volume sold[486]. - Net sales from Latin America South operations decreased by 9.3% in 2025, totaling R$17,988.3 million, impacted by a 0.9% decrease in volume sold and an 8.5% decrease in net revenue per hectoliter[490]. - Net sales from Canadian operations increased by 2.7% in 2025, reaching R$10,259.5 million, despite a 1.4% decrease in volume sold[491]. Costs and Expenses - Cost of sales decreased by 1.7% in 2025 to R$42,864.1 million, with the cost as a percentage of net sales improving to 48.6% from 48.8%[492]. - Commercial, distribution, and administrative expenses decreased by 4.7% in 2025 to R$25,139.9 million from R$26,392.4 million in 2024[500]. - Cost of sales per hectoliter for Brazilian operations increased by 6.3% to R$197.2 in 2025, influenced by higher foreign exchange and commodity costs[494]. - Cost of sales for Canadian operations increased by 1.3% in 2025, reaching R$4,323.3 million from R$4,269.2 million in 2024, with cost per hectoliter rising by 2.7% to R$501.4[499]. Cash Flow and Investments - Cash flows from operating activities decreased by 6.3% in 2025, totaling R$24,450.3 million compared to R$26,099.0 million in 2024, primarily due to losses in net working capital[553]. - Cash flow generated from operating activities before changes in working capital increased by 2.7% in 2025, adding R$779.1 million, while net working capital management resulted in a cash outflow of approximately R$1,616.0 million[554]. - Cash flows used in investing activities decreased by 9.4% in 2025, amounting to R$4,950.2 million, mainly due to lower net acquisition of debt securities[554]. - Cash flows used in financing activities surged by 158.6% in 2025, reaching R$26,771.5 million, driven by higher dividend payments to subsidiaries and associates, which increased by R$16,407.1 million compared to 2024[555]. Production and Operations - As of December 31, 2025, total production capacity for beer and non-alcoholic beverages was 233 million hectoliters per year, with actual production reaching 171 million hectoliters in 2025[454]. - The company operates multiple production facilities across Brazil, including 10 dedicated to beer production and 8 for soft drinks, contributing to its diverse product offerings[454]. - The company has a significant presence in Latin America, with production facilities in countries such as Argentina, Bolivia, and Chile, enhancing its market reach[455]. - The company is involved in the production of various beverage types, including beer, soft drinks, and malt, indicating a diversified product portfolio[456]. - The company has established research and pilot brewing facilities, such as the SAZ Zitec Research Pilot Brewery in Rio de Janeiro, to innovate and develop new products[454]. Strategic Initiatives - The company continues to focus on innovation and technology as key pillars of its strategy for 2026[577]. - The investment in the innovation, research, and development center, ZITEC, was approximately R$130 million over the last three years, including R$40.5 million in 2025[576]. - The implementation of a new ERP system, S4 Hana, is in the final stages, which is crucial for operational efficiency[578]. - The company won 140 medals in various beer competitions globally, including gold medals for Brahma Duplo Malte and Antarctica Original[574]. Agreements and Partnerships - Ambev has a long-term agreement with PepsiCo, with sales volumes of PepsiCo products representing approximately 39% of total NAB sales volumes in Brazil in 2025[436]. - Ambev has a cross-licensing agreement with ABI to produce and distribute Stella Artois and Beck's in Latin America and Canada, while ABI distributes Brahma in Europe and other regions[440]. - Ambev has licensing agreements with Grupo Modelo to produce and market Corona and Modelo products in various Latin American countries and Canada[441][443]. - Ambev has agreements to sell and distribute Michelob Ultra and Goose Island in multiple countries across Latin America and Canada[445]. Regulatory Environment - The Brazilian consumption tax reform approved in December 2023 may impose significant changes, including an excise tax on alcoholic beverages and sugary drinks, which could negatively impact operations[449]. - The ICMS Value-Added Tax rate on soft drinks increased by up to 4% in certain Brazilian states, effective from early 2025[448].

Core Insights - The logistics sector has seen significant engagement from investors, particularly in the ASEAN and US markets, highlighting its growth potential and diversification opportunities [1] Investment Focus - The company has diversified its investments across various sectors including banking, telecommunications, logistics, and hotels, indicating a strategic approach to portfolio management [1] - The entry into the US market in 2020 reflects a growing interest in international investment opportunities, particularly in sectors like banks, hotels, and shipping [1] Market Trends - The popularity of insurance companies in the Philippines since 2014 suggests a shift in investment preferences among local investors, moving towards more diversified financial products [1] - The trend of using platforms like Seeking Alpha for analysis indicates a growing reliance on data-driven investment strategies among investors in both the ASEAN and US markets [1]

Core Insights - Ambev (NYSE:ABEV) is identified as an undervalued penny stock with significant potential for investment [1] Financial Performance - In Q4 2025, Ambev reported a net income of nearly 16 billion BRL, with earnings per share (EPS) increasing by 8.2% year-over-year [1] - Quarterly revenue reached $4.76 billion, reflecting a modest year-over-year increase of 2.31% [1] - The company's digital ecosystem showed strong performance, with B2B marketplace gross merchandise volume (GMV) growing by 70% and consumer delivery GMV rising by 13% to 4.7 billion BRL [1] Challenges and Pressures - The company faced volume pressures due to adverse weather conditions in Brazil and a slower-than-expected consumption recovery in Argentina, impacting the core beer segment [2] - Operating cash flow decreased by 1.6 billion BRL compared to the previous year due to these challenges [2] - Cost pressures persisted, particularly with a 6.1% increase in Brazilian beer cash cost of goods sold (COGS) per hectoliter [3] - Net financial expenses reached nearly 4 billion BRL, primarily due to foreign exchange variation losses [3] Future Outlook - The CEO indicated that while early 2025 was affected by the La Nina phenomenon, weather conditions began to stabilize by January [3]

Core Viewpoint - The article discusses the author's extensive experience in researching various companies across different sectors, emphasizing a focus on value investing and a particular interest in metals and mining stocks. Group 1: Company Research - The company has over a decade of experience in in-depth research across multiple industries, including commodities like oil, natural gas, gold, and copper [1] - The company has transitioned from writing a blog to creating a value investing-focused YouTube channel, where it has researched hundreds of different companies [1] - The company expresses a preference for covering metals and mining stocks but is also comfortable with sectors such as consumer discretionary/staples, REITs, and utilities [1]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying those that can fulfill their potential is challenging [1] Group 1: Company Overview - Ambev (ABEV) is currently recommended as a growth stock by the Zacks Growth Style Score system, which evaluates a company's real growth prospects beyond traditional metrics [2] - The company has a favorable Growth Score and a top Zacks Rank, indicating strong investment potential [2] Group 2: Earnings Growth - Ambev's historical EPS growth rate is 1.3%, but projected EPS growth for this year is 2.8%, significantly outperforming the industry average of 1.1% [4] Group 3: Asset Utilization - Ambev has an asset utilization ratio (sales-to-total-assets ratio) of 0.62, indicating it generates $0.62 in sales for every dollar in assets, which is higher than the industry average of 0.52 [5] Group 4: Sales Growth - The company's sales are expected to grow by 13.3% this year, contrasting sharply with the industry average of -0.1% [6] Group 5: Earnings Estimate Revisions - The current-year earnings estimates for Ambev have been revised upward by 2.8% over the past month, reflecting a positive trend in earnings estimate revisions [7] Group 6: Investment Potential - Ambev has achieved a Growth Score of B and a Zacks Rank of 2 due to positive earnings estimate revisions, suggesting it is a solid choice for growth investors [9]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Ambev (ABEV) - Ambev currently holds a Momentum Style Score of A, indicating strong momentum characteristics [2] - The company has a Zacks Rank of 2 (Buy), suggesting it is positioned for potential outperformance in the market [3] Performance Metrics - ABEV shares have increased by 5.78% over the past week, outperforming the Zacks Beverages - Alcohol industry, which rose by 1.31% [5] - Over the past month, ABEV's price change is 18.46%, significantly higher than the industry's 4.04% [5] - In the last quarter, ABEV shares rose by 22.71%, and over the past year, they gained 61.26%, while the S&P 500 only increased by 2.88% and 13.25%, respectively [6] Trading Volume - ABEV's average 20-day trading volume is 26,425,038 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the past two months, one earnings estimate for ABEV has increased, raising the consensus estimate from $0.18 to $0.19 [9] - For the next fiscal year, one estimate has also moved upwards, with no downward revisions during the same period [9] Conclusion - Given the strong performance metrics and positive earnings outlook, ABEV is recommended as a solid momentum pick with a Momentum Score of A [10]

Core Viewpoint - Ambev (ABEV) has been upgraded to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in a company's earnings picture, specifically tracking the Zacks Consensus Estimate for EPS from sell-side analysts [1][2]. - Changes in future earnings potential, as indicated by earnings estimate revisions, are strongly correlated with near-term stock price movements [4]. - Institutional investors utilize earnings estimates to determine the fair value of a company's shares, leading to stock price movements based on their investment actions [4]. Ambev's Earnings Outlook - The Zacks Consensus Estimate for Ambev indicates earnings of $0.19 per share for the fiscal year ending December 2026, unchanged from the previous year [8]. - Over the past three months, analysts have raised their earnings estimates for Ambev by 2.8% [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Ambev to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].