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DJ Carlsberg Stock Bubbles Up After Earnings Beat. A Dividend Hike and Share Buybacks Are on the Menu. -- Barrons.com

· 02/05/2021 08:53
By Jack Denton

Brewing giant Carlsberg plans to raise its dividend and launch a new share buyback program, after better-than-expected profits in the fourth quarter capped a turbulent but resilient year for the Danish company.

Shares in the world's third-largest brewer rose around 2.5% in Copenhagen trading as investors said cheers to the plan for bigger shareholder payouts.

The back story. The Covid-19 pandemic and waves of national lockdowns have wrought havoc on brewers, who rely on packed bars and restaurants as well as crowded events like concerts for sales. Near-complete closures dried up revenues in the first half of the year, with some return to normalcy through the summer as restrictions were eased.

But new lockdowns imposed in the winter, many of which have continued into 2021, mean that uncertainty remains in the short-term as the world waits for a wide rollout of Covid-19 vaccines. The company adopted a tough cost-cutting strategy amid the pandemic, suspending share buybacks in August and cutting jobs in Copenhagen.

Still, the group bought back 2.9 billion Danish kroner ($337 million) worth of shares in buyback programs throughout the year.

Also read: The Consumer Could Explode in 2021. Here Are the Stocks to Buy.

What's new. Carlsberg posted earnings for the final three months of 2020 on Friday, with sales coming in below analyst forecasts but profits beating expectations. The brewer's revenues of 12.5 million kroner in the fourth quarter were more than 4% below the consensus estimate, with revenue for the full year topping 58.5 million kroner.

But organic operating profit of 9.7 million kroner in 2020 beat analyst expectations by more than 2%. This adjusted earnings figure, closely watched by analysts, represented a 3% fall in profits from 10.5 million kroner in 2019. Overall, beer volumes fell 2.5% in 2020, to 11 billion liters.

Revenue in the final period of the year was driven by growth in Russia -- where Carlsberg's volumes increased 9% -- as well as China, whereas the rest of the world's major beer markets largely shrunk. The company also noted the growing popularity of alcohol-free beer, which grew 11% across the year.

On the back of a resilient year, the company said it would propose a 5% increase to the dividend, to 22 kroner per share. In addition, Carlsberg announced the launch of a 750 million kroner share buyback program, which will run until Apr. 23, and said it plans more buybacks in the next quarter.

"While the pandemic is not yet behind us and we don't know how long it will remain a challenge in 2021, we believe that Carlsberg will emerge even stronger from the crisis," said Cees 't Hart, the group's chief executive.

Carlsberg's guidance for earnings in 2021 is 3% to 10% growth in operating profit.

Plus: Carlsberg Stock Jumps While Heineken Sinks After Earnings. Trouble Is Brewing.

Looking ahead. All told, Carlsberg has swallowed what 2020 brought its way, faring far better than many other companies in an unprecedented year and doling out payouts to shareholders that could make other investors jealous.

And analysts are bullish on the stock, with the consensus estimate for earnings growth in the next year at the upper end of the 3% to 10% range. UBS analysts say it is their preferred name in beverages, above larger rivals like Anheuser Busch InBev and Heineken, in part because of its exposure to more resilient Eastern European markets and China.

(END) Dow Jones Newswires

February 05, 2021 08:53 ET (13:53 GMT)

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