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Alcohol High On Demand, Will These Stocks' Q1 Earnings Cheer?

By Zacks Investment ResearchStock MarketsApr 23, 2018 09:31PM ET
www.investing.com/analysis/alcohol-high-on-demand-will-these-stocks-q1-earnings-cheer-200308267
Alcohol High On Demand, Will These Stocks' Q1 Earnings Cheer?
By Zacks Investment Research   |  Apr 23, 2018 09:31PM ET
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Alcohol is hardly ever in bad taste, especially American whiskey’s popularity among the spirit enthusiasts continues unabated. This is evident from the U.S. Alcohol market’s expansion spree owing to rising demand and improving consumer spending. Among the host of diverse spirts, craft beer seems to be hogging the limelight at the moment, courtesy of its popular fan base and convenient size production. Per BMI Research, global spirits sales are expected to increase by 4.3% in 2018.

In view of these above-mentioned tailwinds, the Beverages-Alcohol industry ranks among the top 45% (116 of 256) of all Zacks industries.

The first-quarter 2018 earnings season has seen releases from nearly 87 S&P 500 members as of Apr 20. Per the latest Earnings Preview, the scenario looks quite compelling, with 82.8% of the members delivering positive earnings surprises and 67.8% trumping top-line expectations. In fact, the proportion of companies pulling off earnings and revenue beats is a stellar 62.1%.

The momentum is likely to continue as total earnings for the S&P 500 index are still anticipated to increase 18.3% from the year-ago period on 7.7% growth in revenues. As the earnings season gets into groove, we expect the scenario to become much more transparent.

Why the Consumer Staples Sector?

Alcohol stocks form part of Consumer Staples sector. We believe the sector is well poised to grow on a buoyant U.S. economy driven by rising consumer confidence, improving consumer spending and an accelerating labor market. In fact, Consumer Staples sector carries a Zacks Rank #8, placing it at the top 50% among 16 Zacks sectors.

Per the latest Earnings Preview, total first-quarter earnings for the sector are likely to grow 6.2% year over year with revenues expected to increase 2.8%. In fact, margins are also estimated to edge up 0.4% year over year.

Notably, Constellation Brands, Inc. (NYSE:STZ) , the world’s leading wine company has already released its earnings numbers on Mar 29. The company delivered better-than-expected quarterly results, witnessing margin expansions, significant market share gains, strong free cash flow and solid execution. As a result, it issued an upbeat outlook for fiscal 2019.

Furthermore, our research shows that when a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock is combined with a positive Earnings ESP, the chance of beating earnings estimates is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

All said, let’s take a look at the performance of a few alcohol stocks ahead of their earnings releases.

The Boston Beer Company, Inc. (NYSE:SAM) is slated to report its first-quarter 2018 results tomorrow. Although the company delivered a negative earnings surprise of 10.6% last quarter, it pulled off a positive surprise in each of the trailing three quarters. Per the Zacks model, Boston Beer is unlikely to deliver earnings beat this quarter. This is because the company has an Earnings ESP of +35.65 and a Zacks Rank #5 (Strong Sell), which makes our surprise prediction difficult.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Though the Zacks Consensus Estimate of 38 cents for the quarter remained stable in the last 30 days, it portrays a decline of more than 15% year over year. Also, it has been witnessing lower shipment volumes and depletions due to challenges in Samuel Adams and Angry Orchard brands along with soft hard cider category. However, management remains confident about its growth plan focused on cost-saving initiatives, long-term innovation and the revival of Samuel Adams and Angry Orchard brands. Moreover, Boston Beer’s brand-building efforts and initiatives to add new products bode well for the company’s top-line growth.

Molson Coors Brewing Company (NYSE:TAP) is scheduled to release first-quarter 2018 results on May 2. Though the company delivered a positive earnings surprise of 10.7% last quarter, it recorded an average miss of 13.2% in the trailing four quarters. Per the Zacks model, the trend is likely to continue as Molson Coors’ Earnings ESP of -0.21% and Zacks Rank #4 (Sell) indicate that it is unlikely to beat earnings. Also, the consensus estimate of 80 cents moved south by a penny in the last seven days but depicts year-over-year growth of 5.3%. Notably, the company has been gaining from its focus on above-premium brands, which form nearly 20% of its total annual brand volumes. Also, management is making efforts to gain share in the U.S. premium light segment through Coors Light and Miller Lite brands.

Craft Brew Alliance, Inc. (NASDAQ:BREW) is expected to report first-quarter 2018 results on May 2. The company boasts an impressive earnings surprise history with a beat in each of the trailing four quarters, delivering an average of 275.9%. Although the company’s Zacks Rank #3 increases the predictive power of earnings beat, an Earnings ESP of 0.00% makes surprise prediction difficult. However, the Zacks Consensus Estimate of 3 cents for the quarter remained stable in the last 30 days and reflects a substantial improvement from a loss of 9 cents incurred in the year-ago quarter. Additionally, management remains optimistic on continuing growth momentum, strategic local brands and partnerships as well as bolstering revenue management and operational improvements. In fact, Kona’s potential of delivering robust growth in 2017 is also impressive.

Anheuser-Busch InBev SA/NV (NYSE:BUD) , alias AB InBev, is slated to report first-quarter 2018 results on May 9. Although the company came up with a positive earnings surprise of 6.1% last quarter, it lagged earnings estimates in the preceding seven quarters. The company has a Zacks Rank #3 which increases the predictive power of EPS. However, an Earnings ESP of 0.00% makes surprise prediction difficult. Also, the consensus mark shows an improvement of 6.8% from the year-ago quarter despite the downtrend in the estimate in the last seven days. While AB InBev's fourth-quarter 2017 results marked a return to the positive earnings trajectory, it envisions a soft first quarter due to difficult comparisons, and phasing of marketing and sales initiatives. Nevertheless, robust brand portfolio and solid geographical reach remain major strengths. It also anticipates delivering strong top-line growth in 2018 backed by impressive brands performance and robust commercial plans.

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Constellation Brands Inc (STZ): Free Stock Analysis Report

Molson Coors Brewing Company (TAP): Free Stock Analysis Report

Anheuser-Busch InBev SA/NV (BUD): Free Stock Analysis Report

Craft Brew Alliance, Inc. (BREW): Free Stock Analysis Report

The Boston Beer Company, Inc. (SAM): Free Stock Analysis Report

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Zacks Investment Research
Alcohol High On Demand, Will These Stocks' Q1 Earnings Cheer?
 

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Alcohol High On Demand, Will These Stocks' Q1 Earnings Cheer?

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