Brand Strength & Pricing to Aid Boston Beer's (SAM) Q3 Earnings
The Boston Beer Company, Inc. SAM is scheduled to report third-quarter 2023 results on Oct 26. In the third quarter, the company is anticipated to have registered bottom-line growth from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for earnings is pegged at $4.25 per share, suggesting growth of 11.3% from the year-ago quarter’s reported figure. The consensus mark has moved up by a penny in the past seven days. For quarterly revenues, the Zacks Consensus Estimate is pegged at $592.9 million, suggesting a 0.6% decline from the prior-year quarter’s reported number.
In the last reported quarter, SAM delivered an earnings surprise of 36.8%. It has a trailing four-quarter negative earnings surprise of 74.9%, on average.
The Boston Beer Company, Inc. Price and EPS Surprise
The Boston Beer Company, Inc. price-eps-surprise | The Boston Beer Company, Inc. Quote
Key Factors to Note
Boston Beer has been benefiting from the progress of its Beyond Beer strategy, the premiumization of the beer industry and robust trends for its twisted tea brand. Additionally, the company’s innovation, intensified attention to pricing and product portfolio expansion efforts bode well.
SAM has been on track with growth of its Beyond Beer category. Beyond Beer is growing faster than the traditional beer market, and the company expects this trend to continue for several years. Its continued strength across the Beyond Beer portfolio is likely to have aided its performance in the to-be-reported quarter.
SAM’s continued focus on pricing, product innovation, growth of non-beer categories and brand development is likely to have boosted its operational performance and position in the market. Its focus on innovation to revive the Truly brand and expand Twisted Tea’s potential bodes well. As part of product innovation, the company expects to improve the Truly brand trends through a renewed focus on the core business, smart brand innovation, and strong distributor support and retail execution.
Coming to Twisted Tea, the brand drove most growth of Boston Beer in the last reported quarter. The brand’s physical availability, improved geographic, channel and package distribution, and effective brand-building campaigns, increased media investment and optimized packaging design have been aiding its performance.
The brand’s growing brand awareness and household penetration are expected to have continued in the to-be-reported quarter. The company expects the Twisted Tea brand to witness strong double-digit growth for the remainder of 2023, which is likely to get reflected in the company’s third-quarter performance.
On the operational front, Boston Beer has been benefiting from strong price realization and procurement savings, which more than offset increased inflationary costs. This has been a boon to the gross margin. Additionally, a decline in advertising, promotional and selling expenses on lower freight to distributors due to reduced rates and volumes is likely to have boosted the bottom line in the third quarter.
Our model predicts the cost of products sold, as a percentage of sales, to decline 300 bps year over year to 53.8% in the third quarter. A reduced cost of products sold rate is likely to have led to gross margin growth in the third quarter. We estimate the gross margin to expand 300 bps to 46.2% in the to-be-reported quarter. On a dollar basis, gross profit is expected to improve 6.1% year over year in the third quarter.
We expect the third-quarter adjusted operating margin to increase 10 basis points to 11.3%, driven by the increase in the gross margin and a 60-bps decline in general and administrative expense rate, offset by a 340-bps increase in the advertising, promotional and selling expense rate.
However, declines in shipments and depletions, as well as continued challenges in the hard seltzer category, have been weighing on the company’s top-line performance. Soft performances of the Truly Hard Seltzer, Angry Orchard, Samuel Adams and Hard Mountain Dew have been hurting shipments.
Boston Beer has been witnessing a slowdown in the hard seltzer category and the demand for the Truly brand in recent quarters. The slowing hard seltzer trends have been partly hurting the company’s depletions.
On the last reported quarter’s earnings call, management expected third-quarter volumes to witness declines due to the continued weakness in Truly volume, partly offset by strong growth in Twisted Tea.
Our model estimates shipment volumes to decline 3% in the third quarter. Depletions for the third quarter are expected to be down 3.5%.
What Does the Zacks Model Say?
Our proven model conclusively predicts an earnings beat for Boston Beer this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Boston Beer has an Earnings ESP of +0.17% and a Zacks Rank #3 at present.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
Simply Good Foods SMPL has an Earnings ESP of +1.35% and a Zacks Rank #2 at present. The company is slated to witness top and bottom-line growth when it reports fourth-quarter fiscal 2023 results. The Zacks Consensus Estimate for SMPL’s quarterly earnings has been unchanged in the past 30 days at 44 cents per share, suggesting growth of 22.2% from the year-ago quarter’s reported number.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Simply Good’s quarterly revenues is pegged at $320.3 million, which suggests growth of 16.8% from the figure reported in the prior-year quarter. SMPL has delivered an earnings surprise of 9.5%, on average, in the trailing four quarters.
Hershey HSY has an Earnings ESP of +1.29% and a Zacks Rank #3 at present. The company is expected to see top and bottom-line growth when it reports third-quarter 2023 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.97 billion, which suggests growth of 9% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Hershey’s quarterly earnings has moved down by a penny in the past seven days to $2.47 per share. The consensus mark suggests growth of 13.8% from the year-ago quarter’s reported number. HSY has delivered an earnings surprise of 8.9%, on average, in the trailing four quarters.
Colgate-Palmolive CL has an Earnings ESP of +0.37% and a Zacks Rank #3 at present. The company is expected to witness top and bottom-line growth when it reports third-quarter 2023 results. The Zacks Consensus Estimate for CL’s quarterly earnings has been unchanged in the past 30 days at 80 cents per share. The consensus mark suggests 8.1% growth from that reported in the year-ago quarter.
The Zacks Consensus Estimate Colgate’s quarterly revenues is pegged at $4.8 billion, which indicates growth of 8.3% from the figure reported in the prior-year quarter. CL has delivered an earnings surprise of 1.7%, on average, in the trailing four quarters.
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Hershey Company (The) (HSY) : Free Stock Analysis Report
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