Sticky pricing, COGS deflation to boost brewers in 2024 - BofA

Royal Unibrew A/S

11/01/2024 13:37

** BofA Global Research forecasts solid sales and EPS growth
for beverages in 2024, growing by 4.8% and 13% respectively,
driven by emerging markets and volume/price balance
    ** It prefers beer to spirits based on better top-line
visibility, lower cost of good sold (COGS) and attractive
valuations
    ** The cost backdrop should be a lot more favourable in
2024, particularly for brewers, BofA says, expecting COGS
deflation and sticky pricing to support margins
    ** It expects organic EBIT to grow by 10% for brewers in
2024, and Italy's Campari  CPRI.MI  to benefit from lower COGS
as well
    ** It sees U.S. spirits slowing further, possibly to zero or
slightly negative for two to three quarters
        ** It also expects consumer spending to remain subdued
in Europe and to be mixed in emerging markets
    ** However, the uncertain 2024 environment is largely priced
in, the broker says, seeing an upside to stock prices
    ** Carlsberg  CARLb.ST  and Heineken  HEIN.AS  are BofA's
top picks; it upgrades the former to "buy" and reiterates the
same rating for the latter
    ** BofA says concerns about Carlsberg's CEO transition,
reinvestment and competition in China are "overdone", and Asia
should continue to drive growth
    ** It downgrades Diageo  DGE.L  to "neutral" from "buy",
expecting the U.S. market to disappoint, and upgrades Royal
Unibrew  RBREW.CO  to "neutral" from "underperform"

 (Reporting by Elsa Ohlen)
 ((elsa.ohlen@thomsonreuters.com;))