December 4, 2021

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Why Is Boston Beer (SAM) Up 18.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Boston Beer (SAM). Shares have added about 18.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Boston Beer due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Boston Beer Q1 Earnings & Sales Miss Estimates

Boston Beer reported first-quarter 2020 results, wherein revenues and earnings missed the Zacks Consensus Estimate. The primary reason for the company’s soft performance in the quarter may be the coronavirus outbreak, impacts of which began to be felt on its business in early March.

As a result of the pandemic, the company has been witnessing a significant reduction in keg demand from the on-premise channel, and higher labor and safety-related costs at its breweries. In first-quarter 2020, it recorded nearly $10 million of coronavirus-related pre-tax reductions in net revenues and increases in other costs. This included $5.8 million related to reduced revenues due to keg returns from distributors and retailers, and $4.2 million of other COVID-19-related costs of which $3.6 million was recorded in cost of goods sold and $0.6 million in operating expenses. Further, COVID-19-related safety measures led to the reduction in internal capacity, shifting more volume to third-party breweries. This caused higher production costs and negatively impacted gross margin. The company informed that it was on track to deliver on its 2020 financial targets prior to the impacts of the coronavirus outbreak were felt. However, citing the evolving situation due to the pandemic, it has withdrawn its guidance for 2020.

Boston Beer’s first-quarter adjusted earnings of $1.32 per share missed the Zacks Consensus Estimate of $1.75. Further, the bottom line declined 29.4% from $1.87 earned in the year-ago period mainly due to lower gross margin and higher operating expenses. This was partly offset by an increase in revenues. On a GAAP basis, earnings were $1.49 per share in the reported quarter.

Net revenues advanced 31.4% year over year to $330.6 million but missed the Zacks Consensus Estimate of $346.8 million. Excluding excise taxes, the top line rose 31.6% year over year to $352.2 million. The increase in the top line can primarily be attributed to a 32.2% improvement in shipments to 1.4 million barrels. Excluding the addition of the Dogfish Head brands, beginning Jul 3, 2019, shipments increased 27.5%. Depletions grew 36%, including a 30% rise from Boston Beer legacy brands and 6% from the addition of Dogfish Head brand.

Prior to the impacts of the COVID-19 outbreak, the company was on track to maintain its guidance for 2020. Depletions for the 9 weeks ended Feb 29, 2020, increased 32% from the prior-year period.  Excluding the Dogfish Head brand, depletions rose 26%. Notably, shipment volume was significantly higher than depletion volume, which resulted in higher distributor inventory levels as of Mar 28, 2020.

Depletion growth can be attributed to major innovations, quality of products and strong brands alongside solid sales execution and support from distributors. Further, increases in Truly Hard Seltzer and Twisted Tea brands as well as the inclusion of Dogfish Head brand aided growth. Depletion growth was partly offset by the fall in Samuel Adams and Angry Orchard brands.

Notably, the company witnessed accelerated growth for the Truly brand as well as the newly launched Truly Hard Lemonade, which are growing beyond expectations. Since January, Boston Beer has seen momentum and expanded market share for the Truly brand, while other hard seltzer brands have lost share. Meanwhile, the Twisted Tea brand generated consistent double-digit volume growth in the first quarter. Going forward, the company envisions significant opportunities for distribution and volume growth for the Truly and Twisted Tea brands. Further, it expects to continue expanding the distribution for the Dogfish Head brand.

Depletions for the year-to-date period through the 15 weeks ended Apr 11, 2020, have grown nearly 32% from that witnessed in the year-ago period. Excluding the Dogfish Head brewery, depletions grew 27%.

Costs & Margins

Gross profit improved 18.8% year over year to $148 million. However, gross margin contracted 470 basis points to 44.8% due to elevated processing costs, stemming from higher production at third-party breweries. Further, higher processing costs and finished goods keg inventory write-offs at company-owned breweries, of which $3.6 million was direct costs related to COVID-19, hurt gross margin. These factors were partly negated by higher prices and cost savings at company-owned breweries. Excluding the impacts of COVID-19-related returns and other direct costs, gross margin was 46.8%.

Furthermore, advertising, promotional and selling expenses rose 36.5% to $97.9 million. The increase was driven by higher investments in media, production and local marketing; expenses related to the inclusion of Dogfish Head brand beginning Jul 3; higher salaries and benefits costs; and increased freight to distributors due to higher volumes. General and administrative expenses totaled $27 million, up 15.4% from the year-ago quarter. The increase was mainly driven by increases in salaries and benefits costs as well as the addition of Dogfish Head’s general and administrative expenses beginning Jul 3, 2019.


As of Mar 28, 2020, Boston Beer had cash and cash equivalents of $129.5 million, and total stockholders’ equity of $758.2 million. The company drew down $100 million from its line of credit in March 2020 to enhance the cash position and liquidity amid the coronavirus pandemic. Currently, it has $50 million available under its line of credit.

During the first quarter, and the period between Mar 30 and Apr 21, Boston Beer did not repurchase shares. As a result, the company has $90.3 million remaining under the $931-million share buyback authorization.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -7.62% due to these changes.

VGM Scores

At this time, Boston Beer has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.


Boston Beer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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