After warning in May that it would fall short of expectations in the second quarter, Anheuser-Busch Companies, Inc. (NYSE: BUD) surprised the analysts by posting a strong performance [pdf]. It reported a net sales increase of 6.1% and an increase in diluted earnings per share of 7.4%. The EPS of $0.88 exceeded the $0.87 projection of analysts polled by Thompson Financial.

Unlike first quarter results, this quarter showed strong sales in the U.S. as well as internationally. U.S. beer sales volume was up 2.3%, due in part to the success of import brands that the company distributes. This and price increases resulted in a 3.1% increase in revenue.

International sales continued to grow, up 4% due primarily to China, Canada and Mexico, partly offset by soft sales in Great Britain. Anheuser-Busch branded products grew 2.2% in volume worldwide.

The performance of Anheuser-Busch's entertainment sector, e.g. Busch Gardens, was up over $5 million as well, due to increased attendance and pricing.

The bottom line was moderated by increasing production and marketing costs, the latter a sign that the beer market continues to mature.

Anheuser-Busch's stock has been complicated by speculation by Citigroup that the company will eventually merge with InBev within the next two years.

Yesterday Anheuser-Busch Cos. (NYSE:BUD) reported a first quarter EPS of $.67, short of the $.69 analysts had expected, and the market reacted with a share price drop of $1.45 to close at $50.90.

The company reported sales of 37.6 million barrels of suds for the quarter, up 2.2% over 2006, but only 0.5% of that growth was in the U.S. International sales were up 8.7%, accounting for the lion's share of growth. The company credits this to strong sales in Canada and China. Also, equity partners Grupo Modelo and Tsingtao did well for the quarter, boosting this class by 4.1% on modest volumes.

More troubling was the report that the company's market share dropped from 50.9% in 2006 to 50.2%. A price increase imposed in this quarter helped the company reach a consolidated net sales increase of 2.7%. For the quarter, the company reported net income of $518 million, up from $499 million a year ago.

Anheuser-Busch Cos. (NYSE:BUD) has been busy expanding its products and markets this month.

The company announced that they will add 12 China markets for their premium brand beers Harbin 1900 and Harbin Ice by the end of the year, joining 30 areas already enjoying the brew. The company has also started selling Harbin 1900 in the U.S. The company also imports Tsingtao, the most popular beer in China, in which Anheuser-Busch holds a 27% share. According to a 2004 study by Kirin, China is now the leading consumer of beer in the world, and growing at 14.6% year to year.

Anheuser-Busch has also reached agreement to import the Czech beer Czechvar, brewed by Budejovicky Budvar. The company has contended for years with this brewer for the right to the trademark "Budweiser". The beer, known as Budvar in much of the world, will continue to be sold in the U.S. under the name Czechvar due to this dispute. Curiously, Anheuser-Busch states that this agreement won't impact existing litigation over trademark infringement.

Late last month, the company also announced they will begin selling the first sorghum beer nationally, which they have named Redbridge. The beer is targeted to customers looking for wheat and/or gluten-free products. It was developed with the input of the National Foundation for Celiac Awareness (NFCA).

I'm curious who they will hire as a spokesperson for this brand.