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Boston Beer (SAM) Q3 Earnings & Revenues Beat, Stock Rises
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The Boston Beer Company, Inc. (SAM - Free Report) reported adjusted earnings per share of $3.82 in third-quarter 2022, surpassing the Zacks Consensus Estimate of $3.16. Better-than-expected earnings mainly resulted from top-line growth, an improved gross margin and lower operating expenses.
Net revenues improved 6.2% year over year to $596.5 million and beat the Zacks Consensus Estimate of $571 million. Excluding excise taxes, the top line rose 5.7% year over year to $634.3 million. Year-over-year growth was mainly driven by strong pricing performance across the portfolio, continued growth in depletions and shipments in Twisted Tea, and positive early progress in Hard Mountain Dew. However, declines in the Seltzer category and the Truly brand continued to hurt the company’s top line.
The shipment volume rose 1.4% to 2.3 million barrels in the third quarter, driven by gains in the Twisted Tea, Hard Mountain Dew and Samuel Adams brands, partly negated by declines in the Truly Hard Seltzer, Angry Orchard and Dogfish Head brands.
Depletions dipped 6% in the third quarter on decreases in the Truly Hard Seltzer, Angry Orchard, Samuel Adams and Dogfish Head brands, offset by gains in the Twisted Tea and Mountain Dew brands. However, depletions in the quarter were slightly better than the year-to-date trend of a 7% decline. Excluding the Truly brand, the depletion volume for the company’s remaining brands improved 14% in the reported quarter.
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise
Depletions for the period (42 weeks) from the start of the year until Oct 15, 2022, declined 6% from that witnessed in the year-ago period. For the same period, shipments decreased 6%.
Shares of Boston Beer gained 1.1% in the after-hours trading session on Oct 20 on better-than-expected top and bottom lines in the third quarter. The Zacks Rank #3 (Hold) stock has lost 5.8% in the past three months compared with the industry’s 9.6% decline.
Image Source: Zacks Investment Research
Costs & Margins
The gross profit improved 49.2% year over year to $257.7 million. The gross margin expanded 1,250 basis points to 43.2% from 30.7% in the year-ago quarter. The rise mainly resulted from increased costs recorded in third-quarter 2021 related to the slowdown in hard seltzer as well as gains from pricing in third-quarter 2022. However, inflationary packaging, ingredient and energy costs, as well as higher inventory obsolescence costs and returns, partly negated gross margin growth in the quarter.
Advertising, promotional and selling expenses were down 7.9% in the reported quarter to $153.7 million. The decline was driven by lower brand investments, particularly media costs, and reduced freight to distributors due to lower freight rates.
General and administrative expenses increased 16.6% year over year to $37.4 million mainly due to increased salaries and benefits costs.
Financials
As of Sep 24, 2022, Boston Beer had cash and cash equivalents of $222.1 million, and total stockholders’ equity of $1,073.9 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.
For 2022, capital spending is anticipated to be $105-$125 million, down from the $110-$140 million mentioned earlier.
Outlook
Driven by the year-to-date results and latest expectations for the fourth quarter, Boston Beer narrowed its guidance range for 2022. However, the company continues to remain sensitive to changes in volume projections, mostly related to the hard seltzer category, supply-chain performance and inflationary impacts. The company noted that its 2022 results would include gains from the 53rd week in the year compared with only 52 weeks in 2021.
For 2022, Boston Beer envisions adjusted earnings per share of $7.00-$10.00 compared with the $6.00-$11.00 mentioned earlier. The company’s adjusted earnings per share guidance excludes the impacts of ASU 2016-09. It anticipates GAAP earnings per share of $5.39-$8.39 for 2022.
Depletions and shipments are expected to decline 4-7% compared with a decrease of 2-8% anticipated earlier. The narrowed view mainly reflects expectations for continued gains in Twisted Tea and Hard Mountain Dew. The company expects the 53rd week to aid depletions and shipment growth rates for 2022 by 1-1.5 percentage points. Depletions and shipment growth rates for the fourth quarter are expected to record gains of 4-6 percentage points from the 53rd week.
SAM anticipates a gross margin of 42-43.5% compared with the 43-45% mentioned earlier. The lower guidance is a result of the impacts of higher inventory obsolescence, as well as lower brewery efficiencies due to the slowed ramp-up of the newly integrated variety pack lines. The company expects to offset the impacts of higher commodity costs through price increases.
Investments in advertising, promotional and selling are expected to decline $35-45 million in 2022 compared with a decrease of $30-50 million mentioned earlier. The advertising, promotional and selling guidance does not assume any changes in freight costs for the shipment of products to its distributors. The non-GAAP effective tax rate is anticipated to be 26-27%, excluding the impacts of ASU 2016-09.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Constellation Brands (STZ - Free Report) , Dutch Bros (BROS - Free Report) and Limoneira Co (LMNR - Free Report) .
Constellation Brands currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 11.1%. STZ has a trailing four-quarter earnings surprise of 10.5%, on average. The company has declined 8.2% in the past three months.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales and earnings per share suggests growth of 8.2% and 8.7%, respectively, from the year-ago reported numbers. The consensus mark for STZ’s earnings per share has moved up 14.9% in the past 30 days.
Dutch Bros currently has a Zacks Rank of 2. BROS has a trailing four-quarter earnings surprise of 53%, on average. It has a long-term earnings growth rate of 32%. The company has declined 7% in the past three months.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales suggests growth of 46.1% from the prior-year reported number, whereas the same for earnings suggests a decline of 26.7%. The consensus mark for BROS’ earnings per share has moved down by a penny in the past 30 days.
Limoneira currently has a Zacks Rank #2. LMNR has a trailing two-quarter earnings surprise of 13.3%, on average. It has a long-term earnings growth rate of 15%. The company has declined 4.3% in the past three months.
The Zacks Consensus Estimate for Limoneira’s current financial-year sales and earnings per share suggests growth of 5.6% and 113.6%, respectively, from the year-ago reported numbers. The consensus mark for LMNR’s earnings per share has moved up to 3 cents in the past 30 days from a loss per share of 4 cents given earlier.
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Boston Beer (SAM) Q3 Earnings & Revenues Beat, Stock Rises
The Boston Beer Company, Inc. (SAM - Free Report) reported adjusted earnings per share of $3.82 in third-quarter 2022, surpassing the Zacks Consensus Estimate of $3.16. Better-than-expected earnings mainly resulted from top-line growth, an improved gross margin and lower operating expenses.
Net revenues improved 6.2% year over year to $596.5 million and beat the Zacks Consensus Estimate of $571 million. Excluding excise taxes, the top line rose 5.7% year over year to $634.3 million. Year-over-year growth was mainly driven by strong pricing performance across the portfolio, continued growth in depletions and shipments in Twisted Tea, and positive early progress in Hard Mountain Dew. However, declines in the Seltzer category and the Truly brand continued to hurt the company’s top line.
The shipment volume rose 1.4% to 2.3 million barrels in the third quarter, driven by gains in the Twisted Tea, Hard Mountain Dew and Samuel Adams brands, partly negated by declines in the Truly Hard Seltzer, Angry Orchard and Dogfish Head brands.
Depletions dipped 6% in the third quarter on decreases in the Truly Hard Seltzer, Angry Orchard, Samuel Adams and Dogfish Head brands, offset by gains in the Twisted Tea and Mountain Dew brands. However, depletions in the quarter were slightly better than the year-to-date trend of a 7% decline. Excluding the Truly brand, the depletion volume for the company’s remaining brands improved 14% in the reported quarter.
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
Depletions for the period (42 weeks) from the start of the year until Oct 15, 2022, declined 6% from that witnessed in the year-ago period. For the same period, shipments decreased 6%.
Shares of Boston Beer gained 1.1% in the after-hours trading session on Oct 20 on better-than-expected top and bottom lines in the third quarter. The Zacks Rank #3 (Hold) stock has lost 5.8% in the past three months compared with the industry’s 9.6% decline.
Image Source: Zacks Investment Research
Costs & Margins
The gross profit improved 49.2% year over year to $257.7 million. The gross margin expanded 1,250 basis points to 43.2% from 30.7% in the year-ago quarter. The rise mainly resulted from increased costs recorded in third-quarter 2021 related to the slowdown in hard seltzer as well as gains from pricing in third-quarter 2022. However, inflationary packaging, ingredient and energy costs, as well as higher inventory obsolescence costs and returns, partly negated gross margin growth in the quarter.
Advertising, promotional and selling expenses were down 7.9% in the reported quarter to $153.7 million. The decline was driven by lower brand investments, particularly media costs, and reduced freight to distributors due to lower freight rates.
General and administrative expenses increased 16.6% year over year to $37.4 million mainly due to increased salaries and benefits costs.
Financials
As of Sep 24, 2022, Boston Beer had cash and cash equivalents of $222.1 million, and total stockholders’ equity of $1,073.9 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.
For 2022, capital spending is anticipated to be $105-$125 million, down from the $110-$140 million mentioned earlier.
Outlook
Driven by the year-to-date results and latest expectations for the fourth quarter, Boston Beer narrowed its guidance range for 2022. However, the company continues to remain sensitive to changes in volume projections, mostly related to the hard seltzer category, supply-chain performance and inflationary impacts. The company noted that its 2022 results would include gains from the 53rd week in the year compared with only 52 weeks in 2021.
For 2022, Boston Beer envisions adjusted earnings per share of $7.00-$10.00 compared with the $6.00-$11.00 mentioned earlier. The company’s adjusted earnings per share guidance excludes the impacts of ASU 2016-09. It anticipates GAAP earnings per share of $5.39-$8.39 for 2022.
Depletions and shipments are expected to decline 4-7% compared with a decrease of 2-8% anticipated earlier. The narrowed view mainly reflects expectations for continued gains in Twisted Tea and Hard Mountain Dew. The company expects the 53rd week to aid depletions and shipment growth rates for 2022 by 1-1.5 percentage points. Depletions and shipment growth rates for the fourth quarter are expected to record gains of 4-6 percentage points from the 53rd week.
SAM anticipates a gross margin of 42-43.5% compared with the 43-45% mentioned earlier. The lower guidance is a result of the impacts of higher inventory obsolescence, as well as lower brewery efficiencies due to the slowed ramp-up of the newly integrated variety pack lines. The company expects to offset the impacts of higher commodity costs through price increases.
Investments in advertising, promotional and selling are expected to decline $35-45 million in 2022 compared with a decrease of $30-50 million mentioned earlier. The advertising, promotional and selling guidance does not assume any changes in freight costs for the shipment of products to its distributors. The non-GAAP effective tax rate is anticipated to be 26-27%, excluding the impacts of ASU 2016-09.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Constellation Brands (STZ - Free Report) , Dutch Bros (BROS - Free Report) and Limoneira Co (LMNR - Free Report) .
Constellation Brands currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 11.1%. STZ has a trailing four-quarter earnings surprise of 10.5%, on average. The company has declined 8.2% in the past three months.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales and earnings per share suggests growth of 8.2% and 8.7%, respectively, from the year-ago reported numbers. The consensus mark for STZ’s earnings per share has moved up 14.9% in the past 30 days.
Dutch Bros currently has a Zacks Rank of 2. BROS has a trailing four-quarter earnings surprise of 53%, on average. It has a long-term earnings growth rate of 32%. The company has declined 7% in the past three months.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales suggests growth of 46.1% from the prior-year reported number, whereas the same for earnings suggests a decline of 26.7%. The consensus mark for BROS’ earnings per share has moved down by a penny in the past 30 days.
Limoneira currently has a Zacks Rank #2. LMNR has a trailing two-quarter earnings surprise of 13.3%, on average. It has a long-term earnings growth rate of 15%. The company has declined 4.3% in the past three months.
The Zacks Consensus Estimate for Limoneira’s current financial-year sales and earnings per share suggests growth of 5.6% and 113.6%, respectively, from the year-ago reported numbers. The consensus mark for LMNR’s earnings per share has moved up to 3 cents in the past 30 days from a loss per share of 4 cents given earlier.