Boston Beer (SAM) Q2 Earnings Top Estimates, Revenues Dip Y/Y
The Boston Beer Company, Inc. SAM reported second-quarter 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While the top line declined from the year-ago quarter, the bottom line increased. The performance mainly reflected strong growth in Twisted Tea, offset by continuing challenges in the hard seltzer category.
Boston Beer witnessed improvements in financial performance and volume, bolstered by the timely occurrence of the July 4th holiday. This positive outcome is a result of the consistent execution of operational plans.
The Zacks Rank #3 (Hold) stock has declined 0.9% in the past three months against the industry’s 0.5% growth.
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Quarter in Detail
Adjusted earnings per share of $4.72 in second-quarter 2023 increased 9.5% from the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of $3.45. This mainly resulted from higher gross margins and operating income.
Net revenues declined 2.1% year over year to $603.3 million but beat the Zacks Consensus Estimate of $599 million. Excluding excise taxes, the top line fell 2.1% year over year to $641.3 million.
The shipment volume declined 4.5% from the year-ago period to 2.3 million barrels in the second quarter of 2023, whereas depletions fell 3%. The decline in shipment and depletion resulted from the soft performances of the Truly Hard Seltzer, Angry Orchard, Samuel Adams and Hard Mountain Dew. These were partly negated by growth in the Twisted Tea and Dogfish Head brands. Our model estimated the shipment volume to decline 4.1% and depletion to decrease 1% in the quarter under review.
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise
The Boston Beer Company, Inc. price-consensus-eps-surprise-chart | The Boston Beer Company, Inc. Quote
The gross profit increased 3.2% year over year to $274.2 million, whereas it expanded 230 basis points (bps) to 45.4% from 43.1% in the year-ago quarter. The gross margin primarily benefited from strong price realization and procurement savings, which more than offset increased inflationary costs.
Advertising, promotional and selling expenses declined 3.6% in the reported quarter to $149.4 million due to lower freight to distributors of $15.7 million on reduced rates and volumes. This was partly offset by higher brand investments of $10.2 million mainly related to investments in consulting, as well as elevated salary and benefit costs. Our model estimated these expenses to decline 1.2% to $153 million in the quarter under review.
General and administrative expenses rose 15.6% year over year to $44.9 million mainly due to increased consulting and legal costs, and higher salaries and benefits costs.
Financials
As of Jul 1, 2023, Boston Beer had cash and cash equivalents of $207.8 million, and total stockholders’ equity of $1,087.2 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 shares worth $52.5 million from Jan 3, 2023, to Jul 21, 2023. During the 26-week period ended Jul 1, 2023, and the period from Jul 2, 2023, through Jul 21, 2023, the company repurchased its Class A Common Stock for $46.7 million and $5.8 million, respectively, a total of $52.5 million year to date. As of Jul 21, 2023, the company had $307 million remaining under its existing share repurchase authorization worth $1.2 billion. For 2023, capital spending is anticipated to be $100-$140 million.
Outlook
The company reiterated its guidance for 2023. Boston Beer envisions GAAP earnings per share of $6.00-$10.00 for 2023. The company’s adjusted earnings per share guidance excludes the impacts of ASU 2016-09.
Depletions and shipments are expected to decline 2-8%. This view includes the adverse impacts of 1% due to an additional 53rd week in fiscal 2022 and fiscal 2023 will have 52 weeks. On a 52-week comparable basis, the company expects depletions and shipments to decline 1-7%.
SAM anticipates a gross margin of 41-43%. The company expects the year-over-year gross margin improvement to be lower in the fourth quarter than that reported in the earlier quarters.
Advertising, promotional and selling expenses in 2023 are expected to grow $20-$40 million, revised from the prior mentioned down $5 million and up $15 million. This does not include any change in freight costs. The non-GAAP effective tax rate is anticipated to be 28%, excluding the impacts of ASU 2016-09.
For the second quarter of 2023, the company expects second-half shipments to benefit from expected continued growth of Twisted Tea, the lapping of last year's Truly Margarita launch and additional investments in advertising spend in the second half of the year.
Consumer Staple Stocks Worth a Look
Here we have highlighted three better-ranked stocks, namely TreeHouse Foods, Inc. THS, Celsius Holdings CELH and McCormick & Company, Incorporated MKC.
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year’s sales suggests a decline of 12.4% from the year-ago reported number and that for earnings suggests significant growth.
Celsius Holdings, which offers functional drinks and liquid supplements, carries a Zacks Rank #2 (Buy) at present. CELH delivered an earnings surprise of 81.8% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings implies surges of 69.6% and 154.4%, respectively, from the prior-year numbers.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 4.2%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 5.1%, respectively, from the year-ago reported numbers.
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The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report
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