Shares of Ambev S.A. (ABEV) closed slightly lower in São Paulo on Friday, falling 0.25% to 15.73 reais, despite UBS bumping up its price target on the brewer to $2.90 from $2.65. The investment bank kept its Sell rating on the stock, signaling caution even as the company posted a solid first-quarter performance driven by record beer volumes in its home market.
The stock has rallied 13.49% since the start of the year, buoyed by expectations around Carnival demand, a shift toward premium brands, and the upcoming FIFA World Cup. However, UBS's stance suggests that valuation concerns remain, particularly after the sharp gains following the earnings release.
In the first quarter, Ambev reported a net profit of 3.89 billion reais, a 2.1% increase from the same period last year. Organic net revenue rose 8.1%, while normalized EBITDA climbed 10.1% to 7.56 billion reais, with margins expanding by 60 basis points to 33.6%. The Brazil Beer segment was the standout, with volumes hitting a first-quarter record, up 1.2%, driven by premium labels such as Stella Artois, Corona, and Original, which saw growth in the low twenties.
Cash flow was a particular bright spot: operating cash flow surged 162.5% to 3.16 billion reais, supported by stronger EBITDA and improved working capital management. The board approved a 1.2 billion reais interest-on-capital payout scheduled for July 6, followed by a second distribution of about 700 million reais by December.
CEO Carlos Lisboa described the quarter as "a solid start to 2026," calling the year "the year of socialization," a theme that underscores the company's strategy of capitalizing on events and gatherings to boost beer consumption. The World Cup is expected to provide a 0.3 to 0.4 percentage point boost to annual industry growth, with most of the impact concentrated in the second and third quarters, according to CFO Guilherme Fleury.
However, cost pressures remain a significant headwind. Consolidated cash cost of goods sold per hectoliter rose 8.5%, and for the Brazil Beer segment, cash COGS excluding marketplace products jumped 14.6%. The company maintains its 2026 guidance for Brazil Beer cash COGS growth of between 4.5% and 7.5%, though Fleury expects these pressures to ease starting in the second quarter.
Competition from Heineken is also intensifying. Last year, Heineken opened a $462 million facility in Minas Gerais, targeting the same premium and pure-malt segment where Ambev claims to be gaining share. This adds pressure on Ambev to defend its turf while pursuing growth.
Analyst sentiment is mixed. The 18-analyst consensus on MarketScreener rates the stock as Hold, with a mean target price of 15.87 reais, only marginally above the latest close. For Ambev, the path forward hinges on converting World Cup momentum and digital initiatives from platforms like Zé Delivery and BEES into tangible sales, while maintaining the margin improvements that have recently won over investors.
