Why Is Boston Beer (SAM) Down 1.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Boston Beer (SAM). Shares have lost about 1.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Boston Beer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Boston Beer Reports Q4 Loss, Revenue Miss
Boston Beer reported dismal fourth-quarter 2023 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. Additionally, the company reported a year-over-year decline in revenues, along with a widened loss per share. The decline mainly resulted from soft trends in the Truly brand, which caused lower shipments and depletions.
The company also noted that the fourth-quarter 2023 results included 13 weeks, while fourth-quarter 2022 had 14 weeks. This impacted its top and bottom-line performances.
The company’s loss per share of $1.49 in fourth-quarter 2023 was wider than the loss of 93 cents in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of earnings of 22 cents. The decline mainly resulted from soft top-line trends, accompanied by higher operating costs.
Net revenues declined 12% year over year to $393.7 million and missed the Zacks Consensus Estimate of $416 million. The dip in the company’s fourth-quarter revenues included an impact of 8.9 percentage points from the 14th week in 2022. Additionally, the company’s fourth-quarter revenues reflected a $5.1-million impact of international sales tax adjustment. Its shipments and depletions declined year over year in the quarter. Excluding excise taxes, the top line dropped 12.3% year over year to $417.4 million.
On a 13-week comparable basis, net revenues declined 3.1% in the fourth quarter. Excluding the impacts of the international sales tax adjustments, net revenues fell 10.9% on a reported basis and 1.9% on a 13-week comparable basis.
Quarter in Detail
The shipment volume declined 12.2% from the year-ago period to 1.5 million barrels in the fourth quarter of 2023, whereas depletions fell 9%. On a 13-week comparable basis, shipments and depletion dipped 3.5% and 1%, respectively. Decreased shipment and depletion resulted from declines in Truly Hard seltzer, partly negated by growth in the Twisted Tea, Samuel Adams Non-Alcoholic styles and Dogfish Head Canned cocktails.
The gross profit declined 10.6% year over year to $147.9 million, whereas it expanded 60 basis points (bps) to 37.6% from 37% in the year-ago quarter. The gross margin primarily benefited from strong price realization, reduced inventory obsolescence and procurement savings. This was partly offset by higher inflationary costs, third-party production shortfall fees and brewery processing costs per barrel due to lower volumes.
Advertising, promotional and selling expenses declined 7.6% in the reported quarter to $128.6 million due to lower freight to distributors of $11.8 million on reduced rates and volumes. This was partly offset by higher brand investments and selling costs of $1.2 million mainly related to increased media investments.
General and administrative expenses rose 5% year over year to $43.7 million mainly due to higher salaries and benefits costs.
The company reported an operating loss of $25.9 million compared with a loss of $16.8 million in the year-ago quarter.
Financials
As of Dec 30, 2023, Boston Beer had cash and cash equivalents of $298.5 million, and total stockholders’ equity of $1,077.9 million. The company currently has $150 million in its line of credit, which, along with its cash position, will be sufficient to meet cash requirements.
The company repurchased Class A shares worth $92.9 million in 2023. From the start of 2024 through Feb 23, the company repurchased shares worth $35.6 million. This brought the total share repurchase since the beginning of 2023 to $128.5 million. As of Feb 23, 2024, the company had $230 million remaining under its existing share repurchase authorization worth $1.2 billion.
Outlook
Boston Beer envisions GAAP earnings per share of $7.00-$11.00 for 2024. Depletions and shipments are expected between a low-single-digit decline and a low-single-digit increase. The company estimates a price increase of 1-2% for 2024.
SAM anticipates a gross margin of 43-45% for 2024. The company's gross margin guidance includes the impacts of 50-75 bps from elevated shortfall fees and 125-150 bps from non-cash expenses of third-party production pre-payments.
Advertising, promotional and selling expenses in 2024 are expected between ($5) million and $15 million. This does not include any change in freight costs for the shipment of products to distributors. The company anticipates an effective tax rate of 27.5% for 2024. Capital spending is expected to be $90-$110 million for 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -78.64% due to these changes.
VGM Scores
Currently, Boston Beer has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Boston Beer has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Boston Beer belongs to the Zacks Beverages - Alcohol industry. Another stock from the same industry, Molson Coors Brewing (TAP), has gained 7.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Molson Coors reported revenues of $2.79 billion in the last reported quarter, representing a year-over-year change of +6.1%. EPS of $1.19 for the same period compares with $1.30 a year ago.
For the current quarter, Molson Coors is expected to post earnings of $0.70 per share, indicating a change of +29.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Molson Coors. Also, the stock has a VGM Score of B.
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The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report
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