An analyst at RBC Capital Markets took the unusual step of reversing a call on the shares of Heineken NV in a span of less than 12 hours on Wednesday, first downgrading the stock and then raising it back to the original level.
(Bloomberg) — An analyst at RBC Capital Markets took the unusual step of reversing a call on the shares of Heineken NV in a span of less than 12 hours on Wednesday, first downgrading the stock and then raising it back to the original level.
Just before 1 a.m. New York time on Wednesday, RBC analyst James Edwardes Jones issued a report cutting Heineken to a sell-equivalent rating of underperform. By around noon, the analyst had issued a new report, boosting his rating back to “sector perform.”
The reversal, the analyst said in his second note, came after he learned that the Dutch brewer’s approach to calculating marketing and selling expenses differs from that of peers like Anheuser-Busch InBev NV and Carlsberg A/S.
Such a swift about-face is uncommon on Wall Street. “It hasn’t happened to me before,” he said in emailed comments to Bloomberg News.
“I’m not sure the optics are the main issue. I think honesty is non-negotiable in my job. Once I realised the downgrade was based on an incorrect premise there was no choice,” he said.
Roughly a half-day earlier, he lowered Heineken on the belief that it was under-investing in marketing based on his assessment of its expenditures relative to peers.
“After discussions with Heineken, we accept this comparison does not provide a complete picture owing to differences in disclosure,” the analyst, who’s based in London, wrote in the second note.
Unlike its rival brewers, he said, Heineken’s marketing and selling expenses exclude personnel and depreciation costs, which makes his earlier comparison between brewers “invalid.”
“This distinction in disclosure is not something we had been made aware of nor discussed with investors in our twenty years covering Heineken,” the analyst wrote.
Representatives for Amsterdam-based Heineken didn’t respond to phone and emailed requests for comment.
The company’s stock rose 0.1% on Wednesday to €90.66 in Amsterdam trading, and is up about 3.2% this year.
–With assistance from Janet Freund.
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