Arguably the most famous New Yorker cover depicts the View of the World from ninth Avenue, in which Manhattan is at its center and makes up its bulk. It’s a self-admittedly myopic map, but one that demonstrates how easy it is to forget the rest of the globe, no matter one’s location.

Anheuser-Busch InBev's Surprising Second-Quarter Results

It’s that same impulse that’s led to confusion about how Anheuser-Busch InBev (ticker: BUD) reported such strong second-quarter results despite the ongoing U.S. boycott of its Bud Light brand, which is no longer the country’s best-selling beer.

Shares of AB InBev jumped last week after it reported an overall strong quarter, as earnings per share came in ahead of expectations, and organic growth climbed. The Bud Light brand was certainly a drag, with second-quarter volume down double digits in North America, but this region accounts for only about a quarter of AB InBev’s business, and the company’s U.S. Bud Light sales an even smaller portion of that.

A Global Presence

The company’s global presence is something that bulls have repeatedly noted amid the domestic furor about Bud Light’s marketing partnership with transgender influencer Dylan Mulvaney and subsequent management response, a point that ’s has made as well.

“With Bud Light issues in the U.S. now discounted in estimates and management keen to push back on further incremental negative U.S. narratives, investors can return to look at the bigger ABI picture,” noted Citi analyst Simon Hales following the report.

A Brighter Future Beyond North America

The world view is certainly a brighter one: Organic revenue jumped in all of AB InBev’s segments outside of North America, and the company enjoyed strong pricing power as well.

AB InBev's Outlook Remains Positive Amid Bud Light's Challenges

Analysts continue to debate the long-term impact of Bud Light's declining market share, but according to Gimme Credit's Dave Novosel, AB InBev may not be heavily affected. Despite a decline in sales, the company's promising outlook for the rest of its portfolio suggests that it will thrive as long as Bud Light stabilizes.

Novosel's recent research report highlights AB InBev's ability to increase prices even in weaker economies, thanks to consumers responding positively to premiumization efforts. While Bud Light's challenges have impacted operating margins in the second quarter and are expected to persist in the second half of the year, Novosel believes that they won't have as significant an impact. Additionally, he predicts a decrease in commodity costs for the company. Furthermore, although AB InBev experienced negative free cash flow in the first half of the year, this is considered a seasonal occurrence, and Novosel estimates that the company will achieve free cash flow of around $4 billion for the entire year.

AB InBev's ability to reduce leverage consistently in recent years positions it well to continue this trend. Experts like Novosel argue that Bud Light's struggles in the American market will not impede AB InBev's overall global growth. As a result, the company is expected to achieve organic revenue growth in the mid- to high-single-digit range in the near future. Based on these positive expectations, Novosel maintains his Buy rating for AB InBev's debt.

Despite being down 4% for the year, AB InBev has seen a recent uptick in trading, rising 1.3% to reach $57.24. The stock has climbed over 7% from its lows earlier this year.

Write Your Comment