156.1 Reasons That May Make SABMiller plc A Buy

Royston Wild reveals why shares in SABMiller plc (LON: SAB) look set to surge higher.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am explaining why I believe SABMiller (LSE: SAB) (NASDAQOTH: SBMRY.US) is set to experience strong earnings expansion in coming years.

Earnings expected to keep their fizz

A strong stable of premium labels, combined with rising exposure to emerging markets, has enabled SABMiller to punch many years of steady earnings growth even during periods of severe macroeconomic turbulence and thus pressure on shoppers’ wallets. And I believe the brewer has what it takes to keep earnings per share (EPS) rolling higher in coming years, with EPS of 156.1p forecast for the year ending March 2014.

The brewing leviathan — whose portfolio of world-class brands include the Grolsch, Peroni and Miller lagers — announced last month that group revenues advanced 6% during April-September, with total volumes rising 2% from the corresponding 2012 period. This was driven by a 1% improvement in lager volumes and 5% increase in soft drinks sales.

In particular the company “achieved a strong performance across our African business and made good progress in building on our positions in Latin America, South Africa and the Asia-Pacific region,” chief executive Alan Clark noted. SABMiller’s largest single geography is Latin America, which now accounts for 23% of total revenues, and growth across emerging geographies continues to outstrip that of the firm’s traditional Western regions.

Indeed, sales from Asia Pacific have grown some 62% in the past year alone, and this region has now overtaken North America in terms of overall revenues. And SABMiller remains proactive in developing its presence in key developing regions, and the company’s Ugandan Nile Breweries subsidiary opened its second brewery in August, effectively doubling brewing capacity in the country.

After punching a mild EPS decline in 2009, SABMiller has recorded strong double-digit improvement each year since then, and boasts a compound annual growth rate of 10.3% during the past four years. And although City forecasters anticipate a slight 4% earnings increase for the current year, to 156.1p per share, this is expected to accelerate again in the year concluding March 2015 — EPS is currently anticipated to advance 12% year-on-year to 174.1p.

The drinks leviathan currently carries a prospective P/E rating of 20.8, above a corresponding average of 19.5 for the complete beverages sector. But in my opinion the company’s stunning record of relentless earnings growth, combined with expanding operations in rich emerging nations, justifies this marginal premium.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Royston does not own shares in SABMiller.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »