In 2013 the almost-unthinkable happened — SABMiller (LSE: SAB) (NASDAQOTH: SBMRY.US) shares failed to beat the FTSE for the first time in 13 years!
The brewing giant had recorded double-digit rises in earnings per share (EPS) for four straight years, but by 2013 it was slipping back and we saw growth of only 11% — and when growth starts to slow, we often see a downwards re-rating for a share price.
Valuation topping out
By the end of 2013, SABMiller shares had reached a price-to-earnings (P/E) ratio of 24, which is a bit stretching — and the rising shares had forced the dividend yield down to under 2% for the first time in years, even though the annual payout was still rising nicely in absolute terms.
Forecasts for the year ending March 2014 suggest EPS should grow by just 3%, and some of the growth-seekers have bailed out and have pushed the shares down by about 15% over the past 12 months, to 2,758p today.
Back to growth
But if City analysts have their sums right (and they occasionally do manage it), then the 9% EPS growth they have penciled in for 2015 followed by 11% the following year should see earnings growth heading back in the right direction. By 2016, in fact, that P/E should be down to under 16 again — perhaps not screaming-bargain territory, but still below the current FTSE forward average of 17.
So how are things going this year so far?
Tough year…
In the firm’s third-quarter update released in 21 January, chief executive Alan Clark did tell us of “continued weakness in consumer sentiment, which particularly impacted our European and North American businesses“, but emerging markets made up for it where SABMiller is apparently “successfully targeting new consumers through affordability and premiumisation initiatives across our brand portfolios“.
And that did help keep sales growth rising. Net producer revenue in Q3 was up 4% with total beverage volumes up 2%. That’s not massive growth, but it’s still positive, and it’s looking pretty much in line with forecasts for March — full-year results should be with us on 22 May.
…but not done yet
SABMiller’s dividend yield still isn’t very high at around 2.5%, but after a tight year in 2013-14, it does look as if earnings growth should be picking up again — the growth story at SABMiller is not over yet!
Worth buying? Well, that’s something only you can decide.
