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Boston Beer (SAM) Beats on Q1 Earnings, 2017 View Intact
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Boston Beer Co. Inc. (SAM - Free Report) reported robust first-quarter 2017 earnings, wherein the bottom line topped estimates. However, both earnings and sales declined year over year. Further, the company reiterated earnings forecast for 2017.
Following the unimpressive results, the stock fell nearly 0.3% in the after-hours trading session on Apr 26. Overall, the shares of Boston Beer have declined 16.6% year to date, underperforming the Zacks categorized Beverages–Alcohol industry’s growth of 10%.
Q4 Highlights
Boston Beer’s first-quarter earnings per share of 45 cents surpassed the Zacks Consensus Estimate of 26 cents but declined 15.1% year over year. The year-over-year decline stemmed from lower revenues and gross margins that were partly mitigated by fall in operating expenses and a tax benefit from the adoption of the new Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-09").
Total revenue dipped 14.4% year over year to $161.7 million, while excluding excise taxes net revenue increased 14.7% year over year to $172.4 million. The Zacks Consensus Estimate was $169.7 million. The fall in the top line resulted from lower shipments offset by price increases. Core shipments declined 15% to 707 thousand barrels, while depletions were down 14%.
In the first quarter, depletion volumes were primarily influenced by the persistent decline in the Samuel Adams and Angry Orchard brands, partly negated by growth in Twisted Tea, and Truly Spiked & Sparkling brands.
The challenging depletion trends continued into the first quarter due to the weakness in Samuel Adams brand, particularly the seasonal beers, alongside a soft craft beer category that remains competitive. The competition in the craft beer segment has intensified as new craft brewers are entering the market and existing ones are expanding distribution and tapping capacities, providing more options for drinkers.
Further, the company notes that the soft depletion trends in 2017. Evidently, depletions through the 15 weeks ended Apr 15, 2017 have fallen nearly 13% from the comparable year-ago period in 2016.
Costs & Margins
Gross profit fell 16.6% year over year to $76.3 million while gross margin shriveled 130 basis points to 47.2% in the quarter. The contraction can be attributed to adverse product mix and unfavorable fixed costs absorption, partially neutralized by improved prices and cost saving initiatives at the breweries.
Advertising, promotional and selling expenses dropped 9.1% to $53.8 million due to lower freight to distributors and fall in point-of-sale costs. General and administrative expenses slumped 11.4% to $18.6 million owing to a favorable stock-based compensation, decreases in salaries and benefits, and consulting costs.
Financials
As of Mar 31, 2017, Boston Beer had cash and cash equivalents of $59.9 million and stockholders’ equity of $435.4 million.
In the first quarter, the company used approximately $5 million of cash in operating activities, while it deployed nearly $7 million toward capital expenditure, primarily to be invested in breweries.
Growth Plan
Management remains committed to a three-point growth plan. One, revival of the Samuel Adams and Angry Orchard brands through packaging, innovation, promotion and brand communication initiatives. Two, accelerated focus on cost savings and efficiency projects, with savings directed for further brand development. Third, long-term innovation, with current focus maintaining the leadership of Truly Spiked & Sparkling brand and ensuring it reaches full potential.
Moreover, Boston Beer remains focused on making investments to revive hard cider category and Angry Orchard brand, while maintaining category leadership. Though management is prepared for not so impressive bottom-line results in the short term, it remains on track to boost long-term profitability. Going forward, the company remains optimistic about the future of craft beer and cider category growth.
Guidance
For 2017, the company reiterated the earnings per share forecast of $4.20–$6.20, based on an uncertain volume outlook. However, the company stated that the actual results may deviate significantly from current projections. Moreover, the company affirmed that 2017 will include 52 weeks as against 53 weeks in 2016.
Other assumptions for earnings include depletions and shipments changes of -7% to +1%. The company continues to anticipate price increases of 1–2%. Gross margin is expected to range from 51–52% due to increased cost savings. Investment in advertising, promotional and selling expenses are envisioned to increase in the range of $20–$30 million.
Effective tax rate for 2017 is anticipated to nearly 37%, excluding the impact of ASU 2016-09, which has been effective for the company from Jan 1, 2017. However, the company lowered capital expenditure guidance for the year to $30–$50 million, which will be directed toward investment in breweries. Earlier, the company had anticipated capital spending of $40–$60 million.
Boston Beer Company, Inc. (The) Price, Consensus and EPS Surprise
Boston Beer currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Constellation Brands Inc. (STZ - Free Report) and Compania Cervecerias Unidas, S.A. (CCU - Free Report) , both sporting a Zacks Rank #1 (Strong Buy) as well as Heineken NV (HEINY - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Constellation Brands, with a long-term EPS growth rate of 17.8%, has surged 11.2% year to date.
Compania Cervecerias has jumped nearly 22.3% year to date. Moreover, the company has an average positive surprise of 1.5% in the trailing four quarters.
Heineken has surged about 20.4% year to date. It has a long-term EPS growth rate of 7.6%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
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Boston Beer (SAM) Beats on Q1 Earnings, 2017 View Intact
Boston Beer Co. Inc. (SAM - Free Report) reported robust first-quarter 2017 earnings, wherein the bottom line topped estimates. However, both earnings and sales declined year over year. Further, the company reiterated earnings forecast for 2017.
Following the unimpressive results, the stock fell nearly 0.3% in the after-hours trading session on Apr 26. Overall, the shares of Boston Beer have declined 16.6% year to date, underperforming the Zacks categorized Beverages–Alcohol industry’s growth of 10%.
Q4 Highlights
Boston Beer’s first-quarter earnings per share of 45 cents surpassed the Zacks Consensus Estimate of 26 cents but declined 15.1% year over year. The year-over-year decline stemmed from lower revenues and gross margins that were partly mitigated by fall in operating expenses and a tax benefit from the adoption of the new Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-09").
Total revenue dipped 14.4% year over year to $161.7 million, while excluding excise taxes net revenue increased 14.7% year over year to $172.4 million. The Zacks Consensus Estimate was $169.7 million. The fall in the top line resulted from lower shipments offset by price increases. Core shipments declined 15% to 707 thousand barrels, while depletions were down 14%.
In the first quarter, depletion volumes were primarily influenced by the persistent decline in the Samuel Adams and Angry Orchard brands, partly negated by growth in Twisted Tea, and Truly Spiked & Sparkling brands.
The challenging depletion trends continued into the first quarter due to the weakness in Samuel Adams brand, particularly the seasonal beers, alongside a soft craft beer category that remains competitive. The competition in the craft beer segment has intensified as new craft brewers are entering the market and existing ones are expanding distribution and tapping capacities, providing more options for drinkers.
Further, the company notes that the soft depletion trends in 2017. Evidently, depletions through the 15 weeks ended Apr 15, 2017 have fallen nearly 13% from the comparable year-ago period in 2016.
Costs & Margins
Gross profit fell 16.6% year over year to $76.3 million while gross margin shriveled 130 basis points to 47.2% in the quarter. The contraction can be attributed to adverse product mix and unfavorable fixed costs absorption, partially neutralized by improved prices and cost saving initiatives at the breweries.
Advertising, promotional and selling expenses dropped 9.1% to $53.8 million due to lower freight to distributors and fall in point-of-sale costs. General and administrative expenses slumped 11.4% to $18.6 million owing to a favorable stock-based compensation, decreases in salaries and benefits, and consulting costs.
Financials
As of Mar 31, 2017, Boston Beer had cash and cash equivalents of $59.9 million and stockholders’ equity of $435.4 million.
In the first quarter, the company used approximately $5 million of cash in operating activities, while it deployed nearly $7 million toward capital expenditure, primarily to be invested in breweries.
Growth Plan
Management remains committed to a three-point growth plan. One, revival of the Samuel Adams and Angry Orchard brands through packaging, innovation, promotion and brand communication initiatives. Two, accelerated focus on cost savings and efficiency projects, with savings directed for further brand development. Third, long-term innovation, with current focus maintaining the leadership of Truly Spiked & Sparkling brand and ensuring it reaches full potential.
Moreover, Boston Beer remains focused on making investments to revive hard cider category and Angry Orchard brand, while maintaining category leadership. Though management is prepared for not so impressive bottom-line results in the short term, it remains on track to boost long-term profitability. Going forward, the company remains optimistic about the future of craft beer and cider category growth.
Guidance
For 2017, the company reiterated the earnings per share forecast of $4.20–$6.20, based on an uncertain volume outlook. However, the company stated that the actual results may deviate significantly from current projections. Moreover, the company affirmed that 2017 will include 52 weeks as against 53 weeks in 2016.
Other assumptions for earnings include depletions and shipments changes of -7% to +1%. The company continues to anticipate price increases of 1–2%. Gross margin is expected to range from 51–52% due to increased cost savings. Investment in advertising, promotional and selling expenses are envisioned to increase in the range of $20–$30 million.
Effective tax rate for 2017 is anticipated to nearly 37%, excluding the impact of ASU 2016-09, which has been effective for the company from Jan 1, 2017. However, the company lowered capital expenditure guidance for the year to $30–$50 million, which will be directed toward investment in breweries. Earlier, the company had anticipated capital spending of $40–$60 million.
Boston Beer Company, Inc. (The) Price, Consensus and EPS Surprise
Boston Beer Company, Inc. (The) Price, Consensus and EPS Surprise | Boston Beer Company, Inc. (The) Quote
Zacks Rank
Boston Beer currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Constellation Brands Inc. (STZ - Free Report) and Compania Cervecerias Unidas, S.A. (CCU - Free Report) , both sporting a Zacks Rank #1 (Strong Buy) as well as Heineken NV (HEINY - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Constellation Brands, with a long-term EPS growth rate of 17.8%, has surged 11.2% year to date.
Compania Cervecerias has jumped nearly 22.3% year to date. Moreover, the company has an average positive surprise of 1.5% in the trailing four quarters.
Heineken has surged about 20.4% year to date. It has a long-term EPS growth rate of 7.6%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>