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Boston Beer (SAM) Q2 Earnings: Will Troubles Continue?

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Boston Beer Co. Inc. (SAM - Free Report) is scheduled to report second-quarter 2016 results on Jul 21, after the closing bell. In the last quarter, the company had delivered a negative earnings surprise of 44.8%.

However, the company delivered earnings beat in the other three of the trailing four quarters. Nonetheless, the company has an average negative surprise of 2.24% over the trailing four quarters. Let’s see how things are shaping up for this announcement.

BOSTON BEER INC Price and EPS Surprise


Factors Influencing This Quarter

Boston Beer is facing a tough time due to weakness in the cider category and troubles at its Samuel Adams brand, which has been up against severe competition from other brewers entering the craft beer market. Boston Beer remains susceptible to weak depletion trends, which along with other factors, hurt its results in the preceding quarter. The company, which performed brilliantly in 2015, succumbed to earnings and sales miss in first-quarter 2016.

In fact, management expects this weakness to persist over the short term. This was reflected in the company’s lowered outlook for 2016. Management slashed its earnings, depletions and shipments and gross margin guidance for 2016.

However, the company's consistent brand-building efforts and initiatives to add new products to its beer, malt and cider businesses remain key revenue drivers. We expect Boston Beer’s continued focus on pricing, product innovation and brand development to boost its operational performance and position in the market. Further, the company is always seeking strategic opportunities to expand its business through inorganic means.

Whether these traits will do wonders for Boston Beer or not, is a wait and see story. For now, considering the weakness in the Samuel Adams brand and the difficult macroeconomic environment, we remain cautious of the upcoming results.   

Earnings Whispers

Our proven model does not conclusively show that Boston Beer is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Boston Beer is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are at $1.97.

Zacks Rank: Boston Beer carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Caterpillar Inc. (CAT - Free Report) , slated to report earnings on Jul 26, has an Earnings ESP of +2.08% and a Zacks Rank #3. Inc. (AMZN - Free Report) , slated to report earnings on Jul 28, has an Earnings ESP of +37.72% and holds a Zacks Rank #3.

AutoNation Inc. (AN - Free Report) , scheduled to report earnings on Jul 29, has an Earnings ESP is at +4.76% and carries a Zacks Rank #3.

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