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Why Is Boston Beer (SAM) Up 2.2% Since Last Earnings Report?

Zacks Equity Research
·6 min read

A month has gone by since the last earnings report for Boston Beer (SAM). Shares have added about 2.2% in that time frame, underperforming 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 catalysts.

Boston Beer Q3 Earnings Beat, Updates View

Boston Beer reported upbeat third-quarter 2020 earnings performance. Meanwhile, the top line lagged estimates. Nonetheless, both earnings and sales improved year over year, backed by strong shipment and depletions trends.

However, 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 as a result of the ongoing pandemic. In third-quarter 2020, it recorded $0.1 million of coronavirus-related pre-tax reductions in net revenues and increases in other costs. Year to date, pre-tax reductions in net revenues and escalation in other costs were $14.2 million, of which $10.0 million was recorded in the first quarter and $4.1 million in the second quarter. This included $3.4 million related to reduced revenues due to keg returns from distributors and retailers, and $10.8 million of other COVID-19-related direct costs, of which $7.4 million was for cost of goods sold and $3.4 million in operating expenses.

Further, COVID-19-related safety measures led to the reduction in brewery productivity, leading to the shifting of more volumes to third-party breweries. This resulted in higher production costs and negatively impacted the gross margin.

Boston Beer’s third-quarter adjusted earnings of $6.51 per share surpassed the Zacks Consensus Estimate of $5.24. Further, the bottom line grew 78.4% from $2.86 earned in the year-ago period, mainly driven by an increase in revenues on the back of shipment growth. This was partly offset by soft gross margins and a rise in operating expenses.

Net revenues advanced 30.2% year over year to $492.8 million but lagged the Zacks Consensus Estimate of $521.4 million. Excluding excise taxes, the top line rose 30.4% year over year from $525.2 million.

The increase in the top line can primarily be attributed to a 30.5% improvement in shipments to 2.1 million barrels. Depletions grew 36%, marking the tenth successive quarter of double-digit growth in depletions. Depletions growth was driven by key innovations, quality and strong brands as well as sales execution and support from distributors. Further, growth was backed by strength in Truly Hard Seltzer and Twisted Tea brands. This was somewhat offset by sluggishness in Samuel Adams, Angry Orchard and Dogfish Head brands, which were most impacted by the pandemic and the related on-premise closures. However, the company notes that these brands closed September on a strong note, reflecting strong growth in off-premise channels compared with September 2019.

Depletions for the year-to-date period through the 42 weeks ended Oct 17, 2020 have grown nearly 39% from that witnessed in the year-ago period. Excluding the Dogfish Head brewery, depletions grew 37%.

Costs & Margins

Gross profit improved 28.1% year over year to $240.6 million. However, gross margin contracted 280 basis points to 46.9% due to elevated processing costs, stemming from higher production at third-party breweries. This was partly negated by price increases and cost-saving initiatives at company-owned breweries.

Advertising, promotional and selling expenses rose 11.8% in the quarter to $108 million. The increase was driven by higher investments in media and production; elevated salaries and benefits costs; and increased freight to distributors, owing to higher volumes.

General and administrative expenses totaled $30.3 million, down 3.5% from the year-ago quarter. The decline was mainly due to one-time costs of $3.6 million related to the Dogfish Head transaction, which was incurred in the third quarter of 2019. This was somewhat offset by higher salaries and benefits costs.


As of Sep 26, 2020, Boston Beer had cash and cash equivalents of $157.1 million, and total stockholders’ equity of $318.5 million. The company currently has $150 million in its line of credit for use to enhance the cash position and liquidity amid the coronavirus pandemic.

During the third quarter and the period between Sep 27 and Oct 16, Boston Beer did not repurchase any shares. As a result, the company has $90.3 million remaining under the $931-million share buyback authorization.


Boston Beer revised its depletions growth and earnings guidance for 2020 based on the trends witnessed in the first nine months and expectations for the remainder of the year. This was mainly driven by strong performance for the company’s Truly brand so far this year.

Furthermore, the company expects the Truly brand to continue to lead business growth in 2021. In early 2021, it plans to launch Truly Iced Tea Hard Seltzer, Truly Extra — a higher ABV version of Truly, and other new Truly flavors and package sizes, as part of its continued innovation in the Hard Seltzer category.

For 2020, management envisions earnings per share of $14-$15. Depletions and shipments are likely to grow 37-42%, wherein the addition of the Dogfish Head brand is expected to contribute 1-2%. The company expects national price increases of 1-2% for 2020.

Moreover, gross margin is anticipated to be 46-47%. Advertising, promotional and selling expenses are forecast to be $55-$65 million compared with $70-$80 million mentioned earlier. The expected decline in advertising, promotional and selling expenses is attributed to lower selling expenses, excluding freight costs for the shipment of products to its distributors. Capital expenditure is likely to be $160-$190 million compared with $180-$200 million stated earlier.

Additionally, the company expects all of its brands to witness growth in 2021. Consequently, it expects volume growth of 35-45% for 2021. The company also outlined its depletion and cost view for 2021.

For 2021, its initial guidance predicts depletion and shipment growth of 35-45%, national price increases of 1-2%, and gross margin of 46-48%. Moreover, it expects advertising, promotional and selling expenses of $130-$150 million, excluding freight costs for the shipment of products to its distributors. Capital spending for 2021 is anticipated to be $300-$400 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 66.67% due to these changes.

VGM Scores

Currently, 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 F on the value side, putting it in the lowest quintile for this investment strategy.

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


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Boston Beer has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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