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Bull of the Day: The Boston Beer Company (SAM)

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The Boston Beer Company (SAM - Free Report) , a Zacks Rank #1 (Strong Buy) is is America's leading brewer of world-class beer. The Company has won more than 500 international awards for its better-tasting beers. Samuel Adams Boston Lager(R) is the Company's flagship brand, celebrated worldwide for its high-quality ingredients and traditional brewing techniques.  It markets and sells its products to a network of approximately 350 wholesalers, who in turn sell to retailers, such as pubs, restaurants, grocery stores, convenience stores, package stores, stadiums, and other retail outlets in various countries.

Recent Earnings Data

The company’s Q1 earnings report surpassed expectations for both earnings and revenues.  On a year over year basis, earnings grew by +22.2%, and revenues improved by +17.3%.  A +15% increase in shipments helped the big revenue beat.  Further, net income increased by +63.2% due to improvements in net revenues and gross margins.  Lastly, gross margins came in at 50.5%, a +3.3% increase from the year ago quarter. 

Upcoming Earnings Expectations

The company is scheduled to report Q2 18 results on July 26th, after the market closes.  Current expectations are for EPS of $2.77, representing a +17.9% improvement from the year ago quarter, and revenues of $276 million, a +4.1% increase from Q2 17.  For fiscal year 2018 EPS is expected to grow by +34.8% while revenues are currently pegged to increase by +6.6%.  To add, gross margins for FY 18 are expected to be between 52-54%. 

Management’s Take

According to Jim Koch, Chairman and Founder of the Company, “Our total company depletions increased in the first quarter. We saw significant improvement in Samuel Adams and Angry Orchard trends, led by our key innovations that include Sam '76, Samuel Adams New England IPA and Angry Orchard Rose, all of which are generating excitement during the early stages of their introductions. To date, the response from our wholesalers, retailers and drinkers has been quite positive, but it's too early to fully understand repeat rates on these new products and therefore to draw conclusions on the long-term impact.  New craft brewers continue to enter the market and existing craft brewers are expanding their distribution and tap rooms, with the result that drinkers are seeing more choices. We believe that we are well positioned to meet our longer-term challenges because of the quality of our employees, our beers, our innovation capability and our sales execution strength, coupled with our strong financial position that enables us to invest in growing our brands and creating new growth opportunities.”

Price and Earnings Consensus Graph

As you can see in the graph below, the company’s stock price has seen an almost vertical inclination since the second half of 2017.

The Boston Beer Company, Inc. Price and Consensus

The Boston Beer Company, Inc. Price and Consensus | The Boston Beer Company, Inc. Quote

Increasing Earnings Estimates

Over the past 30 days, earnings estimates have been positively revised for Q2 18, Q3 18, FY 18 and FY 19: Q2 18 rose from $2.64 to $2.77, Q3 18 improved from $2.96 to $3.68, FY 18 was lifted from $7.37 to $8.10, and FY 19 increased from $8.13 to $9.09.

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