Anheuser-Busch Cos. Inc. (BUD), the largest U.S. brewer, on Wednesday reported a greater than expected drop in quarterly profit as price cuts on key brands hurt the company's bottom line.

The company also warned that its full-year-profit would fall 10 percent to 11 percent below last year's figures and its shares slid 2.4 percent to their lowest in more than three years.

"We are disappointed in our sales and earnings results," Anheuser-Busch president and chief executive Patrick Stokes said. "Both the company and the domestic beer industry have experienced volume declines and significant cost pressures."

The company, whose brands include Budweiser (search) and Michelob (search), reported a third-quarter profit of $518 million, or 66 cents a share. This compares with earnings of $684 million, or 88 cents a share, in the same quarter last year.

The results include a charge of $105 million, or 12 cents per share, from the settlement of a defamation lawsuit brought by the family of former baseball star Roger Maris. The Maris family claimed Anheuser-Busch made false statements about the family's beer distributorship.

Analysts on average were expecting earnings per share of 80 cents, according to Reuters Estimates.

U.S. brewers have been slashing prices in recent months in a bid to drive up volume, which has suffered as consumer tastes shifted toward wine and distilled spirits. Wall Street also has taken a dim view of the beer industry as more than five analysts have cut their profit outlook on the brewers in the last month.

"Discounting is not working," said Mark Swartzberg, analyst at Legg Mason. "They are sacrificing profitability and not getting volumes."

Rolling back price cuts is a relatively easy way to improve profitability but the company still faces challenges with regards to increasing volume, Swartzberg added. Swartzberg recently upgraded his rating on Anheuser's shares to "hold" from "sell" but warned that the stock still faced a downside risk.

Anheuser-Busch shares were down 84 cents to $40.91 on the New York Stock Exchange (search). Earlier, the stock traded as low as $40.60.

Shares of Anheuser-Busch have fallen 17.3 percent this year, while the S&P 500 index, which includes Anheuser-Busch's stock, is down about 1.3 percent for the same period.

The stock trades at 15.7 times next year's expected earnings, a premium over smaller rival Molson Coors Brewing Co. (TAP), which carries a 13.9 price to earnings ratio.

The company said third-quarter gross sales, which exclude the impact of excise taxes, rose to $4.69 billion from $4.68 billion. After excise taxes, sales rose to $4.09 billion from $4.08 billion.

Total volume rose 11.5 percent during the quarter, but volume in the company's key U.S. market fell 1.4 percent.

Anheuser-Busch forecast full-year earnings per share, excluding items, such as the Maris settlement, in a range of $2.42 to $2.45. Including items, it said it expected earnings per share of $2.34 to $2.37.

Earlier this year, the company forecast a drop in full-year earnings per share, but declined to give specific figures. Analysts on average were forecasting full-year earnings per share of $2.55, according to Reuters Estimates.