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.
3 Reasons to Hold Boston Beer (SAM) Stock in Your Portfolio
Read MoreHide Full Article
The Boston Beer Company, Inc. (SAM - Free Report) has been benefiting from the progress of its Beyond Beer strategy, the premiumization of the beer industry and robust trends for its twisted tea brand. The company’s innovation, intensified attention to pricing and product portfolio expansion efforts bode well.
SAM benefited from solid price realization and procurement savings in third-quarter 2023, which more than offset increased inflationary costs. Its third-quarter 2023 top and bottom lines beat the Zacks Consensus Estimate and improved year over year.
Shares of Boston Beer have risen 16.9% in the past six months against the industry and the Consumer Staples sector’s declines of 7.6% and 2.2%, respectively. The company’s shares have also outpaced the S&P 500’s growth of 5.8%.
The Zacks Consensus Estimate for the Zacks Rank #3 (Hold) company’s current financial year’s earnings suggests growth of 4% from the year-ago period’s reported number.
Image Source: Zacks Investment Research
Beyond Beer & Premiumization
SAM is on track with the growth of its Beyond Beer category. Beyond Beer is growing faster than the traditional beer market and the company expects this trend to continue for several years. Its advancement in the non-beer categories, including ciders and hard seltzer, as well as brand-building efforts, is expected to fortify its position in the market.
Boston Beer has made successful innovations in craft beer, hard cider and iced tea categories over the years. It is on track with the growth of its Beyond Beer category, wherein it currently holds the second position. Beyond Beer is growing faster than the traditional beer market. The company expects the trend to continue for the next several years.
Innovation – Truly & Twisted Tea Brands
SAM's focus on innovation to revive the Truly brand and expand Twisted Tea’s potential bodes well. Boston Beer is keen on bringing excitement to the Truly brand’s core flavors through innovation. The firm expects to improve Truly brand’s trends through a renewed focus on core business, smart brand innovation and strong distributor support and retail execution. The company's Truly flavored bottle Vodka and Truly Vodka Seltzer have been performing well.
Twisted Tea is the brand that drove the most growth for Boston Beer in the third quarter. Being one of the fastest-growing brands, Twisted Tea rose in double-digits and emerged as the number one brand in FMB in 2022 by increasing 3 share points.
Improved geographic, channel and package distribution; effective brand-building campaigns; increased media investment; and optimized packaging design have been aiding the performance of the Twisted Tea brand. Its growing brand awareness and household penetration also bode well. The company further expanded its light portfolio offerings with a new variety pack available in select highly developed markets and has received positive feedback for the same.
SAM recently announced the testing of the higher ABV version of Twisted Tea, called Twisted Tea Extreme, in select markets this summer. Consequently, the brand is likely to witness strong double-digit growth for the remainder of 2023.
Pricing Strategy
In recent years, Boston Beer has implemented strategic pricing actions that have boosted its position in the competitive landscape. Craft beer enthusiasts are known for their willingness to pay a premium for unique and high-quality brews. SAM has leveraged this consumer mindset by strategically pricing its products to reflect the craft beer experience it offers.
The company is optimistic about continued pricing gains in the near term. It estimates price increases of 2-3% for 2023 versus the 1-3% growth mentioned previously. It anticipates positive price realization in the fourth quarter, but at a lower level due to lower third-quarter price increases from the prior year.
Hurdles in the Way
Boston Beer has been witnessing a slowdown in the hard seltzer category and the demand for the Truly brand in recent quarters. The slowing hard seltzer trends hurt the company’s depletions to some extent in third-quarter 2023. The hard seltzer category witnessed a continued decline in the third quarter.
Despite the strong performance, Boston Beer anticipates soft volume trends for the fourth quarter. Consequently, it provided an adverse volume view for 2023 and lowered the earnings per share guidance.
Nonetheless, the company’s focus on improving Truly brand trends through a renewed focus on the core business, smart brand innovation and strong distributor support and retail execution bodes well. Its advancement in the non-beer categories, including ciders and hard seltzer, should continue to drive progress.
Stocks to Consider
Here, we have highlighted some better-ranked stocks from the broader Consumer Staples space, namely PepsiCo (PEP - Free Report) , Coca-Cola (KO - Free Report) and Sysco (SYY - Free Report) .
PepsiCo is one of the leading global food and beverage companies. Its complementary brands/businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. PEP has a trailing four-quarter earnings surprise of 5.6%, on average.
The Zacks Consensus Estimate for PepsiCo’s current financial-year sales and earnings suggests growth of 6.4% and 11.2%, respectively, from the year-ago period's reported figures. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Coca-Cola, a leading soft drink company, currently has a Zacks Rank #2. KO has a trailing four-quarter earnings surprise of 5.1%, on average.
The Zacks Consensus Estimate for Coca-Cola’s current financial-year sales and earnings suggests growth of 5.7% and 8.1%, respectively, from the year-ago period’s reported figures.
Sysco is a marketer and distributor of a range of food and related products primarily to the foodservice or food-away-from-home industry. It currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 4.1% and 8%, respectively, from the year-ago period’s reported figures.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
3 Reasons to Hold Boston Beer (SAM) Stock in Your Portfolio
The Boston Beer Company, Inc. (SAM - Free Report) has been benefiting from the progress of its Beyond Beer strategy, the premiumization of the beer industry and robust trends for its twisted tea brand. The company’s innovation, intensified attention to pricing and product portfolio expansion efforts bode well.
SAM benefited from solid price realization and procurement savings in third-quarter 2023, which more than offset increased inflationary costs. Its third-quarter 2023 top and bottom lines beat the Zacks Consensus Estimate and improved year over year.
Shares of Boston Beer have risen 16.9% in the past six months against the industry and the Consumer Staples sector’s declines of 7.6% and 2.2%, respectively. The company’s shares have also outpaced the S&P 500’s growth of 5.8%.
The Zacks Consensus Estimate for the Zacks Rank #3 (Hold) company’s current financial year’s earnings suggests growth of 4% from the year-ago period’s reported number.
Image Source: Zacks Investment Research
Beyond Beer & Premiumization
SAM is on track with the growth of its Beyond Beer category. Beyond Beer is growing faster than the traditional beer market and the company expects this trend to continue for several years. Its advancement in the non-beer categories, including ciders and hard seltzer, as well as brand-building efforts, is expected to fortify its position in the market.
Boston Beer has made successful innovations in craft beer, hard cider and iced tea categories over the years. It is on track with the growth of its Beyond Beer category, wherein it currently holds the second position. Beyond Beer is growing faster than the traditional beer market. The company expects the trend to continue for the next several years.
Innovation – Truly & Twisted Tea Brands
SAM's focus on innovation to revive the Truly brand and expand Twisted Tea’s potential bodes well. Boston Beer is keen on bringing excitement to the Truly brand’s core flavors through innovation. The firm expects to improve Truly brand’s trends through a renewed focus on core business, smart brand innovation and strong distributor support and retail execution. The company's Truly flavored bottle Vodka and Truly Vodka Seltzer have been performing well.
Twisted Tea is the brand that drove the most growth for Boston Beer in the third quarter. Being one of the fastest-growing brands, Twisted Tea rose in double-digits and emerged as the number one brand in FMB in 2022 by increasing 3 share points.
Improved geographic, channel and package distribution; effective brand-building campaigns; increased media investment; and optimized packaging design have been aiding the performance of the Twisted Tea brand. Its growing brand awareness and household penetration also bode well. The company further expanded its light portfolio offerings with a new variety pack available in select highly developed markets and has received positive feedback for the same.
SAM recently announced the testing of the higher ABV version of Twisted Tea, called Twisted Tea Extreme, in select markets this summer. Consequently, the brand is likely to witness strong double-digit growth for the remainder of 2023.
Pricing Strategy
In recent years, Boston Beer has implemented strategic pricing actions that have boosted its position in the competitive landscape. Craft beer enthusiasts are known for their willingness to pay a premium for unique and high-quality brews. SAM has leveraged this consumer mindset by strategically pricing its products to reflect the craft beer experience it offers.
The company is optimistic about continued pricing gains in the near term. It estimates price increases of 2-3% for 2023 versus the 1-3% growth mentioned previously. It anticipates positive price realization in the fourth quarter, but at a lower level due to lower third-quarter price increases from the prior year.
Hurdles in the Way
Boston Beer has been witnessing a slowdown in the hard seltzer category and the demand for the Truly brand in recent quarters. The slowing hard seltzer trends hurt the company’s depletions to some extent in third-quarter 2023. The hard seltzer category witnessed a continued decline in the third quarter.
Despite the strong performance, Boston Beer anticipates soft volume trends for the fourth quarter. Consequently, it provided an adverse volume view for 2023 and lowered the earnings per share guidance.
Nonetheless, the company’s focus on improving Truly brand trends through a renewed focus on the core business, smart brand innovation and strong distributor support and retail execution bodes well. Its advancement in the non-beer categories, including ciders and hard seltzer, should continue to drive progress.
Stocks to Consider
Here, we have highlighted some better-ranked stocks from the broader Consumer Staples space, namely PepsiCo (PEP - Free Report) , Coca-Cola (KO - Free Report) and Sysco (SYY - Free Report) .
PepsiCo is one of the leading global food and beverage companies. Its complementary brands/businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. PEP has a trailing four-quarter earnings surprise of 5.6%, on average.
The Zacks Consensus Estimate for PepsiCo’s current financial-year sales and earnings suggests growth of 6.4% and 11.2%, respectively, from the year-ago period's reported figures. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Coca-Cola, a leading soft drink company, currently has a Zacks Rank #2. KO has a trailing four-quarter earnings surprise of 5.1%, on average.
The Zacks Consensus Estimate for Coca-Cola’s current financial-year sales and earnings suggests growth of 5.7% and 8.1%, respectively, from the year-ago period’s reported figures.
Sysco is a marketer and distributor of a range of food and related products primarily to the foodservice or food-away-from-home industry. It currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 4.1% and 8%, respectively, from the year-ago period’s reported figures.