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Boston Beer (SAM) Hits 52-Week Low: What's Dragging it Down?
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Boston Beer Co. Inc. (SAM - Free Report) , one of the largest craft brewers in the U.S., has been losing sheen of late owing to soft depletion trends throughout 2016. This softness can primarily be attributed to weakness in the Samuel Adams brand, soft craft beer and cider categories as well as a troubled retail backdrop. This has greatly strained the company’s stock performance, which touched a new 52-week low mark of $133.55 on Jun 13.
Furthermore, shares of Boston Beer have declined 20.9% year to date, while the Zacks categorized Beverages – Alcohol industry has grown 9.2%.
Apart from the soft depletion trends, the year-over-year decline in first-quarter 2017 earnings along with an uncertain volumes and profitability outlook for 2017 led to the recent fall in share price.
Further, this Zacks Rank #5 (Strong Sell) company’s estimates have declined in the last 30 days. The Zacks Consensus Estimate for 2017 fell by 22 cents to $5.11 per share while estimate for 2018 declined by 17 cents to $5.57 per share. Further, the current Zacks Consensus Estimate of $1.44 per share for second-quarter 2017 reflects 29.9% decline from the prior-year quarter. Analysts polled by Zacks anticipate revenues of $236.9 million, down 9.3% from the year-ago quarter.
Boston Beer Company, Inc. (The) Price, Consensus and EPS Surprise
Though Boston Beer’s first-quarter 2017 earnings topped estimates, both earnings and sales declined year over year. While bottom-line results were hurt by lower revenues and soft gross margin, the top line was impacted by lower shipments and fall in depletions. The softness in depletion trends was mainly due to general weakness in the craft beer and cider categories, with persistent decline in the Samuel Adams and Angry Orchard brands.
The competition in the craft beer segment has intensified as new craft brewers are entering the market and existing ones are expanding their distribution and tapping capacities, providing more options for drinkers.
Moreover, the company has been witnessing contraction in the gross margin for five straight quarters now. In the first quarter, the company’s gross margin shriveled 130 basis points to 47.2%, attributable to adverse product mix and unfavorable fixed costs absorption, partially neutralized by improved prices and cost saving initiatives at the breweries. Further, the company anticipates gross margin for 2017 to range from 51–52% on the back of increased cost savings. The soft margin poses threats to the company’s future performance.
Further, the company notes that the soft depletion trends have continued into second-quarter 2017. Evidently, depletions through the 15 weeks ended Apr 15, 2017 have declined nearly 13% from the comparable year-ago period in 2016.
Based on the soft depletion trends, the company remains uncertain about volumes and profitability for 2017. Consequently, the company reiterated earnings per share, as well as depletions and shipments view for 2017.
Is a Turnaround Possible?
However, the company’s efforts to revive its Samuel Adams and Angry Orchard brands, alongside accelerated focus on cost savings and efficiency projects, show promise. The company’s three point growth plan focuses on revival of its Samuel Adams and Angry Orchard brands, cost saving initiatives and long-term innovation. One, the company is keen on the revival of the Samuel Adams and Angry Orchard brands through packaging, innovation, promotion and brand communication initiatives. Additionally, it continually reviews brand strategies and activation plans to confirm that its investments are effective and efficient in structuring long-term brand equities.
Two, the company has accelerated its focus on cost savings and efficiency projects, while ensuring that these savings are directed for further brand development. Based on the company’s ongoing cost savings programs across the organization, it anticipates increasing gross margin by 1% every year over the next three years. The company’s third priority is long-term innovation, wherein its focus currently hovers around maintaining the leadership of its Truly Spiked & Sparkling brand and ensuring it reaches full potential.
Further, we believe the company’s practice of acquiring assets to expand geographically will aid it to gain significant market share. Moreover, the company’s brand-building efforts and initiatives to add new products remain key revenue drivers.
Bottom Line
Though the company’s revival efforts are noteworthy, we believe these actions will take time to bear fruits and reflect in its financial results. Also, the intensifying competition in the craft beer segment cannot be ignored. So, it is advisable to stay away from the stock at the moment.
Stocks to Consider
Meanwhile, investors may consider better-ranked stocks in the same industry like Craft Brew Alliance, Inc. , sporting a Zacks Rank #1 (Strong Buy), while Carlsberg AS (CABGY - Free Report) and Constellation Brands Inc. (STZ - Free Report) , both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Craft Brew Alliance has gained nearly 20.4% in the last three months. Also, the company’s estimates for the current fiscal have witnessed positive estimate revisions in the last 30 days.
Carlsberg has a long-term EPS growth rate of 7.3%. Further, the company has surged 26.5% year to date.
Constellation Brands has witnessed an increase of 17.8% year to date. Further, the stock has a long-term growth rate of 17.8% and recorded an average beat of 7.7% in the trailing four quarters.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Boston Beer (SAM) Hits 52-Week Low: What's Dragging it Down?
Boston Beer Co. Inc. (SAM - Free Report) , one of the largest craft brewers in the U.S., has been losing sheen of late owing to soft depletion trends throughout 2016. This softness can primarily be attributed to weakness in the Samuel Adams brand, soft craft beer and cider categories as well as a troubled retail backdrop. This has greatly strained the company’s stock performance, which touched a new 52-week low mark of $133.55 on Jun 13.
Furthermore, shares of Boston Beer have declined 20.9% year to date, while the Zacks categorized Beverages – Alcohol industry has grown 9.2%.
Apart from the soft depletion trends, the year-over-year decline in first-quarter 2017 earnings along with an uncertain volumes and profitability outlook for 2017 led to the recent fall in share price.
Further, this Zacks Rank #5 (Strong Sell) company’s estimates have declined in the last 30 days. The Zacks Consensus Estimate for 2017 fell by 22 cents to $5.11 per share while estimate for 2018 declined by 17 cents to $5.57 per share. Further, the current Zacks Consensus Estimate of $1.44 per share for second-quarter 2017 reflects 29.9% decline from the prior-year quarter. Analysts polled by Zacks anticipate revenues of $236.9 million, down 9.3% from the year-ago quarter.
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
What’s Leading to the Decline?
Though Boston Beer’s first-quarter 2017 earnings topped estimates, both earnings and sales declined year over year. While bottom-line results were hurt by lower revenues and soft gross margin, the top line was impacted by lower shipments and fall in depletions. The softness in depletion trends was mainly due to general weakness in the craft beer and cider categories, with persistent decline in the Samuel Adams and Angry Orchard brands.
The competition in the craft beer segment has intensified as new craft brewers are entering the market and existing ones are expanding their distribution and tapping capacities, providing more options for drinkers.
Moreover, the company has been witnessing contraction in the gross margin for five straight quarters now. In the first quarter, the company’s gross margin shriveled 130 basis points to 47.2%, attributable to adverse product mix and unfavorable fixed costs absorption, partially neutralized by improved prices and cost saving initiatives at the breweries. Further, the company anticipates gross margin for 2017 to range from 51–52% on the back of increased cost savings. The soft margin poses threats to the company’s future performance.
Further, the company notes that the soft depletion trends have continued into second-quarter 2017. Evidently, depletions through the 15 weeks ended Apr 15, 2017 have declined nearly 13% from the comparable year-ago period in 2016.
Based on the soft depletion trends, the company remains uncertain about volumes and profitability for 2017. Consequently, the company reiterated earnings per share, as well as depletions and shipments view for 2017.
Is a Turnaround Possible?
However, the company’s efforts to revive its Samuel Adams and Angry Orchard brands, alongside accelerated focus on cost savings and efficiency projects, show promise. The company’s three point growth plan focuses on revival of its Samuel Adams and Angry Orchard brands, cost saving initiatives and long-term innovation. One, the company is keen on the revival of the Samuel Adams and Angry Orchard brands through packaging, innovation, promotion and brand communication initiatives. Additionally, it continually reviews brand strategies and activation plans to confirm that its investments are effective and efficient in structuring long-term brand equities.
Two, the company has accelerated its focus on cost savings and efficiency projects, while ensuring that these savings are directed for further brand development. Based on the company’s ongoing cost savings programs across the organization, it anticipates increasing gross margin by 1% every year over the next three years. The company’s third priority is long-term innovation, wherein its focus currently hovers around maintaining the leadership of its Truly Spiked & Sparkling brand and ensuring it reaches full potential.
Further, we believe the company’s practice of acquiring assets to expand geographically will aid it to gain significant market share. Moreover, the company’s brand-building efforts and initiatives to add new products remain key revenue drivers.
Bottom Line
Though the company’s revival efforts are noteworthy, we believe these actions will take time to bear fruits and reflect in its financial results. Also, the intensifying competition in the craft beer segment cannot be ignored. So, it is advisable to stay away from the stock at the moment.
Stocks to Consider
Meanwhile, investors may consider better-ranked stocks in the same industry like Craft Brew Alliance, Inc. , sporting a Zacks Rank #1 (Strong Buy), while Carlsberg AS (CABGY - Free Report) and Constellation Brands Inc. (STZ - Free Report) , both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Craft Brew Alliance has gained nearly 20.4% in the last three months. Also, the company’s estimates for the current fiscal have witnessed positive estimate revisions in the last 30 days.
Carlsberg has a long-term EPS growth rate of 7.3%. Further, the company has surged 26.5% year to date.
Constellation Brands has witnessed an increase of 17.8% year to date. Further, the stock has a long-term growth rate of 17.8% and recorded an average beat of 7.7% in the trailing four quarters.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>