We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Boston Beer (SAM) Falls as Higher Costs Weigh on Q2 Earnings
Read MoreHide Full Article
The Boston Beer Company, Inc. (SAM - Free Report) reported a dismal second-quarter 2018, wherein both top and bottom lines missed estimates. Notably, this marked an earnings lag after a beat in the last reported quarter. Including second-quarter 2018, the company has surpassed earnings estimates in five of the trailing seven quarters. However, the company has delivered negative sales surprise in three of the trailing four quarters.
Shares of Boston Beer lost as much as 15.5% in the after-hour trading session yesterday, courtesy of the dismal second-quarter results. However, this Zacks Rank #1 (Strong Buy) stock has rallied 39.1% in the past three months against the industry’s decline of 2.6%.
Q2 Highlights
Boston Beer’s second-quarter 2018 adjusted earnings per share of $1.98 lagged the Zacks Consensus Estimate of $2.77 and declined 15.7% from earnings of $2.35 in the prior-year quarter. The decline mainly stemmed from higher advertising, promotional and selling expenses, as well as gross margin contraction, somewhat negated by higher revenues and lower income taxes.
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise
Net revenues advanced nearly 10.2% year over year to $273.1 million but missed the Zacks Consensus Estimate of $275.5 million. Excluding excise taxes, the top line rose 9.4% year over year to $289.6 million, primarily driven by 9% improvement in shipment volumes to nearly 1.2 million barrels. Additionally, depletions grew 12% compared with 8% growth in the first quarter. This double-digit growth marked record depletions for the company.
In the reported quarter, depletion primarily gained from major innovations, quality and strong brands, alongside solid sales execution and support from distributors. Additionally, increases in Twisted Tea, Truly Spiked & Sparkling, and Angry Orchard brands aided depletion growth, which was partially offset by a fall in the Samuel Adams brand. Depletions for the year-to-date period through the 29 weeks ended Jul 21, 2018, are estimated to have grown nearly 12% from the comparable year-ago period.
Costs & Margins
Gross profit improved 15.1% year over year to $131.1 million while gross margin fell 210 basis points to 52%. The decline can be attributed to higher processing costs, stemming from increased production at third-party breweries, as well as escalated packaging costs, partly negated by better pricing, cost-saving gains from the company-owned breweries and lower excise taxes.
Furthermore, advertising, promotional and selling expenses increased 27.6% to $86.5 million, mainly owing to higher investments in media advertising, local marketing, salaries and benefits costs, as well as increased freight to distributors on escalated rates and volumes.
General and administrative expenses grew 23.2% to $23.9 million, driven by higher salaries and benefits costs as well as stock compensation expenses.
Financials
As of Jun 30, 2018, Boston Beer had cash and cash equivalents of $76.2 million and total stockholders’ equity of $442.7 million.
During the year-to-date period ended Jun 30 and the period between Jul 1 and Jul 20, Boston Beer bought back about 222,000 shares worth roughly $50.5 million. With this, it had nearly $128.1 million remaining under its $931-million share buyback authorization as of Apr 20, 2018.
Growth Plan
Management remains committed toward three-point growth plan. Firstly, it plans to revive the Samuel Adams brand through packaging, innovation, promotion and brand communication initiatives. Further, it remains keen on retaining Angry Orchard and Twisted Tea’s momentum while ensuring Truly Spiked & Sparkling's leadership position in the hard sparkling-water category.
The company’s current Angry Orchard campaign has received a favorable response with the early success of the Angry Orchard Rosé cider launch. This has resulted in the shift of new drinkers to the category from wine and spirits. Samuel Adams witnessed a decline in the second quarter, despite the early success of the recently launched Sam '76 and New England IPA. Backed by the promising outlook for these innovations, the company remains committed to aggressively supporting these brands in the second half of 2018.
Secondly, the company is focused on accelerated cost savings and efficiency projects, with savings directed for further brand development. Driven by the visible opportunities in 2018 and 2019, management has reiterated its target of gross margin expansion by an average of one percentage point every year, through 2019.
Thirdly, management remains committed to investing in short and long-term product innovations while maximizing the shareholder value. Boston Beer also remains optimistic about the craft beer and cider categories in the future.
Guidance
Management reiterated its earnings guidance for 2018. For the year, adjusted earnings per share continued to be envisioned between $6.30 and $7.30. Of the assumptions for the earnings view, the company raised its depletions forecast, based on favorable trends witnessed in the first half of 2018. The company now projects depletion to grow 7-12% against the prior guidance of flat-to-up 6%. Price increases continue to be estimated at 0-2%.
The company lowered its targeted gross margin forecast for the year, mainly due to additional costs related to the higher production volumes at third-party breweries, and increased ingredient and packaging material costs. Gross margin is now estimated to be 51-53% compared with the previous guidance of 52-54%.
Further, investment in advertising, promotional and selling expenses is envisioned to increase $15-$25 million, excluding any increase in freight costs for shipments to distributors. Management continues to anticipate general and administrative expenses to grow $10-$20 million, attributable to organizational investments and stock-compensation expenses. Adjusted effective tax rate guidance is anticipated to be roughly 28%, excluding the impact of ASU 2016-09.
Backed by plans to increase investments in breweries and tap rooms, the company raised its capital expenditure guidance for 2018. The company now projects capital spending of $65-$75 million compared with $55-$65 million estimated earlier.
Shiseido has long-term earnings growth rate of 5%. Moreover, the stock has increased 16.1% in the last three months.
Darling Ingredients has rallied 18% in the last three months. The company delivered an average positive earnings surprise of 106.1% in the last four quarters.
Turning Point has delivered positive earnings surprise of 16.7% in the last reported quarter. Moreover, the stock has rallied 55.5% in the last three months.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Boston Beer (SAM) Falls as Higher Costs Weigh on Q2 Earnings
The Boston Beer Company, Inc. (SAM - Free Report) reported a dismal second-quarter 2018, wherein both top and bottom lines missed estimates. Notably, this marked an earnings lag after a beat in the last reported quarter. Including second-quarter 2018, the company has surpassed earnings estimates in five of the trailing seven quarters. However, the company has delivered negative sales surprise in three of the trailing four quarters.
Shares of Boston Beer lost as much as 15.5% in the after-hour trading session yesterday, courtesy of the dismal second-quarter results. However, this Zacks Rank #1 (Strong Buy) stock has rallied 39.1% in the past three months against the industry’s decline of 2.6%.
Q2 Highlights
Boston Beer’s second-quarter 2018 adjusted earnings per share of $1.98 lagged the Zacks Consensus Estimate of $2.77 and declined 15.7% from earnings of $2.35 in the prior-year quarter. The decline mainly stemmed from higher advertising, promotional and selling expenses, as well as gross margin contraction, somewhat negated by higher revenues and lower income taxes.
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise | The Boston Beer Company, Inc. Quote
Net revenues advanced nearly 10.2% year over year to $273.1 million but missed the Zacks Consensus Estimate of $275.5 million. Excluding excise taxes, the top line rose 9.4% year over year to $289.6 million, primarily driven by 9% improvement in shipment volumes to nearly 1.2 million barrels. Additionally, depletions grew 12% compared with 8% growth in the first quarter. This double-digit growth marked record depletions for the company.
In the reported quarter, depletion primarily gained from major innovations, quality and strong brands, alongside solid sales execution and support from distributors. Additionally, increases in Twisted Tea, Truly Spiked & Sparkling, and Angry Orchard brands aided depletion growth, which was partially offset by a fall in the Samuel Adams brand. Depletions for the year-to-date period through the 29 weeks ended Jul 21, 2018, are estimated to have grown nearly 12% from the comparable year-ago period.
Costs & Margins
Gross profit improved 15.1% year over year to $131.1 million while gross margin fell 210 basis points to 52%. The decline can be attributed to higher processing costs, stemming from increased production at third-party breweries, as well as escalated packaging costs, partly negated by better pricing, cost-saving gains from the company-owned breweries and lower excise taxes.
Furthermore, advertising, promotional and selling expenses increased 27.6% to $86.5 million, mainly owing to higher investments in media advertising, local marketing, salaries and benefits costs, as well as increased freight to distributors on escalated rates and volumes.
General and administrative expenses grew 23.2% to $23.9 million, driven by higher salaries and benefits costs as well as stock compensation expenses.
Financials
As of Jun 30, 2018, Boston Beer had cash and cash equivalents of $76.2 million and total stockholders’ equity of $442.7 million.
During the year-to-date period ended Jun 30 and the period between Jul 1 and Jul 20, Boston Beer bought back about 222,000 shares worth roughly $50.5 million. With this, it had nearly $128.1 million remaining under its $931-million share buyback authorization as of Apr 20, 2018.
Growth Plan
Management remains committed toward three-point growth plan. Firstly, it plans to revive the Samuel Adams brand through packaging, innovation, promotion and brand communication initiatives. Further, it remains keen on retaining Angry Orchard and Twisted Tea’s momentum while ensuring Truly Spiked & Sparkling's leadership position in the hard sparkling-water category.
The company’s current Angry Orchard campaign has received a favorable response with the early success of the Angry Orchard Rosé cider launch. This has resulted in the shift of new drinkers to the category from wine and spirits. Samuel Adams witnessed a decline in the second quarter, despite the early success of the recently launched Sam '76 and New England IPA. Backed by the promising outlook for these innovations, the company remains committed to aggressively supporting these brands in the second half of 2018.
Secondly, the company is focused on accelerated cost savings and efficiency projects, with savings directed for further brand development. Driven by the visible opportunities in 2018 and 2019, management has reiterated its target of gross margin expansion by an average of one percentage point every year, through 2019.
Thirdly, management remains committed to investing in short and long-term product innovations while maximizing the shareholder value. Boston Beer also remains optimistic about the craft beer and cider categories in the future.
Guidance
Management reiterated its earnings guidance for 2018. For the year, adjusted earnings per share continued to be envisioned between $6.30 and $7.30. Of the assumptions for the earnings view, the company raised its depletions forecast, based on favorable trends witnessed in the first half of 2018. The company now projects depletion to grow 7-12% against the prior guidance of flat-to-up 6%. Price increases continue to be estimated at 0-2%.
The company lowered its targeted gross margin forecast for the year, mainly due to additional costs related to the higher production volumes at third-party breweries, and increased ingredient and packaging material costs. Gross margin is now estimated to be 51-53% compared with the previous guidance of 52-54%.
Further, investment in advertising, promotional and selling expenses is envisioned to increase $15-$25 million, excluding any increase in freight costs for shipments to distributors. Management continues to anticipate general and administrative expenses to grow $10-$20 million, attributable to organizational investments and stock-compensation expenses. Adjusted effective tax rate guidance is anticipated to be roughly 28%, excluding the impact of ASU 2016-09.
Backed by plans to increase investments in breweries and tap rooms, the company raised its capital expenditure guidance for 2018. The company now projects capital spending of $65-$75 million compared with $55-$65 million estimated earlier.
Looking for Other Solid Stocks? Check These
Some other top-ranked stocks in the consumer staples sector include Shiseido Co. (SSDOY - Free Report) , Darling Ingredients Inc. (DAR - Free Report) and Turning Point Brands, Inc. (TPB - Free Report) , each carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shiseido has long-term earnings growth rate of 5%. Moreover, the stock has increased 16.1% in the last three months.
Darling Ingredients has rallied 18% in the last three months. The company delivered an average positive earnings surprise of 106.1% in the last four quarters.
Turning Point has delivered positive earnings surprise of 16.7% in the last reported quarter. Moreover, the stock has rallied 55.5% in the last three months.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>