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Boston Beer (SAM) Hits a 52-Week High: Can It Scale Higher?

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The Boston Beer Company, Inc. (SAM - Free Report) is soaring to new highs backed by its strategic initiatives, including cost-saving initiatives, long-term innovation and the revival of Samuel Adams and Angry Orchard brands. Further, the company’s positive earnings and sales surprise trend alongside improvement in shipments and depletions continue to impress.

Shares of Boston Beer touched a 52-week high of $260.30 on Jun 4, before closing a notch lower at $260.15. Year to date, this Zacks Rank #1 (Strong Buy) stock has gained 36.1% against the industry’s decline of 10.6%.



 

What’s Aiding SAM’s Impressive Price Performance?

Boston Beer is progressing well with its three-point growth plan focused on the revival of its Samuel Adams and Angry Orchard brands, cost-saving initiatives and long-term innovation. In this regard, management 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 is optimistic about the future of craft beer and cider categories as well.

Boston Beer is also making strides to address industry challenges through improved cost structure and re-investing these savings for brand development. In fact, this has been significantly contributing toward improving gross margin. In 2017, the company’s cost savings and efficiency projects delivered above the targeted ranges, providing increased flexibility to invest in brands, positioning it well for 2018. Gross margin expanded 330 basis points in first-quarter 2018 driven by better pricing, product and package mix, and favorable fixed-cost absorption along with cost-savings gains from the company-owned breweries. For 2018, Boston Beer expects gross margins between 52% and 54%.

In fact, the company’s first-quarter 2018 results marked fifth earnings beat in the last six quarters and the third positive sales surprise in the trailing four quarters. Results gained from gross margin improvement, lower operating costs owing to the company’s cost-saving initiatives as well as lower tax rate. Meanwhile, sales benefited from improved shipment volumes and depletions. Depletion primarily gained from increases in Twisted Tea, Truly Spiked & Sparkling and Angry Orchard brands, partially offset by decrease in the Samuel Adams brand.

For 2018, depletions and shipments are likely to range from flat to up 6%. Earnings per share are envisioned between $6.30 and $7.30 for the year. The Zacks Consensus Estimate for 2018 is pegged higher at $7.37.

While these factors are raising investor optimism on the stock, we note Boston Beer is currently losing market share to a horde of smaller craft brewers that are providing more choices to drinkers. Nevertheless, Boston Beer remains the largest premium craft brewer in the United States and commands a strong portfolio of globally recognized brands. We expect the company’s continued focus on pricing, product innovation and brand development to boost its operational performance and position in the market.

Interested in Consumer Staples Stocks? Check These

Medifast, Inc. (MED - Free Report) has a long-term earnings growth rate of 15% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inter Parfums, Inc. (IPAR - Free Report) , also a Zacks Rank #1 stock, pulled off an average positive earnings surprise of 11.8% in the trailing four quarters.

Last reported quarter, B&G Foods, Inc. (BGS - Free Report) delivered an earnings beat of 7.8%. The company carries a Zacks Rank #2 (Buy).

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