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Boston Beer (SAM) Dips on Q4 Earnings Miss, Revenues Beat
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Shares of The Boston Beer Company, Inc. (SAM - Free Report) declined 5.2% in the after-hours trading session on Feb 17 on lower-than-expected earnings results for fourth-quarter 2020. Meanwhile, the top line beat estimates. Also, earnings and sales improved year over year, backed by strong shipment and depletion trends.
However, the company has been witnessing a significant reduction in keg demand from the on-premise channel, and higher labor and safety-related costs at its breweries as a result of the ongoing pandemic. In fourth-quarter 2020, it recorded $1.8 million of pandemic-related pre-tax reductions in net revenues and increases in other costs.
For 2020, pre-tax reductions in net revenues and escalation in other costs were $16 million. This included $3.3 million related to reduced revenues due to keg returns from distributors and retailers, and $12.7 million of other COVID-related direct costs, comprising cost of goods sold and operating expenses.
Further, COVID-related safety measures led to the reduction in brewery productivity, leading to the shifting of more volumes to third-party breweries. This resulted in higher production costs and negatively impacted the gross margin.
The Zacks Rank #3 (Hold) stock has rallied 22.5% in the past three months compared with the industry’s 4.2% growth.
Q4 Details
Boston Beer’s fourth-quarter adjusted earnings of $2.56 per share missed the Zacks Consensus Estimate of $3.02. On a GAAP basis, the bottom line was $2.64 per share, reflecting an increase of 135.7% from $1.12 in the year-ago period. Lower-than-expected earnings mainly resulted from a soft gross margin and a rise in operating expenses, offset by higher revenues.
Net revenues advanced 53% year over year to $460.9 million but lagged the Zacks Consensus Estimate of $455.9 million. Excluding excise taxes, the top line rose 54.1% year over year from $493.3 million.
The increase in the top line can primarily be attributed to a 54% improvement in shipments to 1.94 million barrels. Notably, shipments improved at a higher rate than depletions in the fourth quarter and resulted in higher distributor inventory levels as of Dec 26, 2020.
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise
Depletions grew 26%, marking the 11th successive quarter of double-digit growth in depletions. Depletions growth was driven by key innovations, quality and strong brands as well as sales execution and support from distributors. Further, growth was backed by strength in Truly Hard Seltzer and Twisted Tea brands. This was somewhat offset by sluggishness in Samuel Adams, Angry Orchard and Dogfish Head brands, which were most impacted by the pandemic-led on-premise closures.
Meanwhile, the company notes that gains for its Truly brand were driven by market share growth in the off-premise channel from 22 points to 26. Also, the Twisted Tea brand benefited from higher at-home consumption despite increasing competition from new players.
Depletions for the year-to-date period through the six weeks ended Feb 6, 2021, have grown nearly 53% from that witnessed in the year-ago period.
Costs & Margins
Gross profit improved 51.5% year over year to $216.3 million. However, gross margin contracted 50 basis points to 46.9% due to elevated processing costs, stemming from higher production at third-party breweries. This was partly negated by price increases and cost-saving initiatives at company-owned breweries.
Advertising, promotional and selling expenses rose 51.6% in the quarter to $141.3 million. The increase was driven by higher investments in media and production; elevated salaries and benefits costs; and increased freight to distributors, owing to higher volumes.
General and administrative expenses remained flat at $31.2 million mainly due to one-time costs of $2.1 million related to the Dogfish Head transaction, which was incurred in the fourth quarter of 2019. This was somewhat offset by higher salaries and benefits costs.
Financials
As of Dec 26, 2020, Boston Beer had cash and cash equivalents of $163.3 million, and total stockholders’ equity of $957 million. The company currently has $150 million in its line of credit, which along with its cash position will be sufficient to meet future cash requirements.
In 2020 and the period between Dec 26, 2020, and Feb 12, 2021, Boston Beer did not repurchase any shares. As a result, the company has $90.3 million remaining under the $931-million share buyback authorization as of Feb 12, 2021.
For 2021, capital spending is anticipated to be $300-$400 million.
Outlook
For 2021, Boston Beer envisions earnings per share of $20-$24, excluding the impacts of ASU 2016-09. Depletions and shipments are likely to increase 35-45%. The company expects national price increases of 1-2% for 2021.
Moreover, gross margin is anticipated to be 45-47%, reflecting a decline from 46-48% mentioned earlier. Advertising, promotional and selling expenses are forecast to be $120-$140 million, marking a decline from $130-$150 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. Non-GAAP effective tax rate is anticipated to be 26.5%, excluding the impacts of ASU 2016-09.
Monster Beverage Corporation (MNST - Free Report) has a long-term earnings growth rate of 12%. The company presently carries a Zacks Rank #2.
Coca-Cola FEMSA S.A.B. de C.V. (KOF - Free Report) currently carries a Zacks Rank #2. It has a long-term earnings growth rate of 9.6%.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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Boston Beer (SAM) Dips on Q4 Earnings Miss, Revenues Beat
Shares of The Boston Beer Company, Inc. (SAM - Free Report) declined 5.2% in the after-hours trading session on Feb 17 on lower-than-expected earnings results for fourth-quarter 2020. Meanwhile, the top line beat estimates. Also, earnings and sales improved year over year, backed by strong shipment and depletion trends.
However, the company has been witnessing a significant reduction in keg demand from the on-premise channel, and higher labor and safety-related costs at its breweries as a result of the ongoing pandemic. In fourth-quarter 2020, it recorded $1.8 million of pandemic-related pre-tax reductions in net revenues and increases in other costs.
For 2020, pre-tax reductions in net revenues and escalation in other costs were $16 million. This included $3.3 million related to reduced revenues due to keg returns from distributors and retailers, and $12.7 million of other COVID-related direct costs, comprising cost of goods sold and operating expenses.
Further, COVID-related safety measures led to the reduction in brewery productivity, leading to the shifting of more volumes to third-party breweries. This resulted in higher production costs and negatively impacted the gross margin.
The Zacks Rank #3 (Hold) stock has rallied 22.5% in the past three months compared with the industry’s 4.2% growth.
Q4 Details
Boston Beer’s fourth-quarter adjusted earnings of $2.56 per share missed the Zacks Consensus Estimate of $3.02. On a GAAP basis, the bottom line was $2.64 per share, reflecting an increase of 135.7% from $1.12 in the year-ago period. Lower-than-expected earnings mainly resulted from a soft gross margin and a rise in operating expenses, offset by higher revenues.
Net revenues advanced 53% year over year to $460.9 million but lagged the Zacks Consensus Estimate of $455.9 million. Excluding excise taxes, the top line rose 54.1% year over year from $493.3 million.
The increase in the top line can primarily be attributed to a 54% improvement in shipments to 1.94 million barrels. Notably, shipments improved at a higher rate than depletions in the fourth quarter and resulted in higher distributor inventory levels as of Dec 26, 2020.
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 grew 26%, marking the 11th successive quarter of double-digit growth in depletions. Depletions growth was driven by key innovations, quality and strong brands as well as sales execution and support from distributors. Further, growth was backed by strength in Truly Hard Seltzer and Twisted Tea brands. This was somewhat offset by sluggishness in Samuel Adams, Angry Orchard and Dogfish Head brands, which were most impacted by the pandemic-led on-premise closures.
Meanwhile, the company notes that gains for its Truly brand were driven by market share growth in the off-premise channel from 22 points to 26. Also, the Twisted Tea brand benefited from higher at-home consumption despite increasing competition from new players.
Depletions for the year-to-date period through the six weeks ended Feb 6, 2021, have grown nearly 53% from that witnessed in the year-ago period.
Costs & Margins
Gross profit improved 51.5% year over year to $216.3 million. However, gross margin contracted 50 basis points to 46.9% due to elevated processing costs, stemming from higher production at third-party breweries. This was partly negated by price increases and cost-saving initiatives at company-owned breweries.
Advertising, promotional and selling expenses rose 51.6% in the quarter to $141.3 million. The increase was driven by higher investments in media and production; elevated salaries and benefits costs; and increased freight to distributors, owing to higher volumes.
General and administrative expenses remained flat at $31.2 million mainly due to one-time costs of $2.1 million related to the Dogfish Head transaction, which was incurred in the fourth quarter of 2019. This was somewhat offset by higher salaries and benefits costs.
Financials
As of Dec 26, 2020, Boston Beer had cash and cash equivalents of $163.3 million, and total stockholders’ equity of $957 million. The company currently has $150 million in its line of credit, which along with its cash position will be sufficient to meet future cash requirements.
In 2020 and the period between Dec 26, 2020, and Feb 12, 2021, Boston Beer did not repurchase any shares. As a result, the company has $90.3 million remaining under the $931-million share buyback authorization as of Feb 12, 2021.
For 2021, capital spending is anticipated to be $300-$400 million.
Outlook
For 2021, Boston Beer envisions earnings per share of $20-$24, excluding the impacts of ASU 2016-09. Depletions and shipments are likely to increase 35-45%. The company expects national price increases of 1-2% for 2021.
Moreover, gross margin is anticipated to be 45-47%, reflecting a decline from 46-48% mentioned earlier. Advertising, promotional and selling expenses are forecast to be $120-$140 million, marking a decline from $130-$150 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. Non-GAAP effective tax rate is anticipated to be 26.5%, excluding the impacts of ASU 2016-09.
Some Better-Ranked Stocks to Consider
Diageo plc (DEO - Free Report) has a long-term earnings growth rate of 8.3%. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Monster Beverage Corporation (MNST - Free Report) has a long-term earnings growth rate of 12%. The company presently carries a Zacks Rank #2.
Coca-Cola FEMSA S.A.B. de C.V. (KOF - Free Report) currently carries a Zacks Rank #2. It has a long-term earnings growth rate of 9.6%.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>