Anheuser-Busch profit tops view

NEW YORK (Reuters) - Anheuser-Busch Cos Inc (BUD.N) posted a greater-than-expected 11 percent increase in quarterly profit on Wednesday and affirmed its full-year outlook, as the brewer's portfolio of imports helped it sell more beer at higher prices.

But underlying sales trends for its core domestic brands, including Budweiser and Bud Light, were weaker than some investors expected, muting the market's positive reaction.

Anheuser-Busch shares closed up 32 cents, or less than 1 percent, at $51.87 on the New York Stock Exchange.

"The stock is likely up in relief because we believe there had been fears that the company could miss or guide down based on an earnings miss at Grupo Modelo SAB de CV (GMODELOC.MX), which is the key component of Anheuser's equity income," said Goldman Sachs analyst Judy Hong. "The lack of a miss is a plus, but we believe the quality of the report is not great."

The St. Louis-based brewer reported net income of $706.7 million, or 95 cents per share, for the third quarter, ended September 30, compared with $637.5 million, or 82 cents per share, a year ago.

Analysts on average were expecting 93 cents per share, according to Reuters Estimates.

Quarterly net sales rose to $4.62 billion from $4.28 billion a year ago. The company sold 45 million barrels of beer in the third quarter, up 4.1 percent.

U.S. beer segment sales increased 6.7 percent, due to a 2 percent increase in sales volume to wholesalers and a 3.1 percent increase in revenue per barrel, due to price increases and higher sales from new premium products such as Bacardi Silver Mojito, Landshark Lager and Budweiser Chelada, which is a mix of Budweiser beer and Clamato juice.

U.S. sales from wholesalers to retailers rose 2.2 percent.

Anheuser, like rivals Molson Coors Brewing Co (TAP.N) and SABMiller Plc's (SAB.L) Miller unit, are facing multiple challenges in the United States, including the rising costs of commodities such as aluminum and grains and a shift in consumer tastes away from domestic beer toward wine and spirits.

The company has sought to diversify with equity stakes in Mexico's Modelo and China's Tsingtao Brewery Co Ltd (600600.SS), as well as distribution deals with InBev NV INTB.BR, Koninklijke Grolsch NV GROLc.AS and Hansen Natural Corp (HANS.O).

The company said it felt the benefits of its broadened portfolio in the quarter, especially of some of the higher-end brands. It added that the earnings contribution from its international segment accelerated, led by Modelo, whose Corona Extra is the leading import brew in the United States.

International beer sales were up 16 percent, helped by increases in China, Mexico and Canada.

The company said its equity income increased 18.4 percent, driven by higher Modelo sales.

But the company lowered its full-year estimate for equity income growth, based on lower-than-expected results from Modelo, which is about half-owned by Anheuser.

Anheuser-Busch said it plans to raise the prices of most of its beers in early 2008, with increases in several states in the fourth quarter of 2007.

The St. Louis-based brewer still expects 2007 earnings per share growth to exceed its long-term growth target of 7 percent to 10 percent.

Morgan Stanley analyst William Pecoriello said the company's underlying sales trends were weaker than expected, despite warm weather and industry growth in September and its revenue per barrel increase was also weaker than expected.

Therefore, Pecoriello said that, despite the third-quarter earnings beat, he remained comfortable with his below consensus earnings forecast for 2008.

(Reporting by Martinne Geller, editing by Brian Moss/Andre Grenon)