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Will Product Launches Aid Boston Beer's (SAM) Q1 Earnings?

By Zacks Investment ResearchStock MarketsApr 18, 2018 10:49PM ET
www.investing.com/analysis/will-product-launches-aid-boston-beers-sam-q1-earnings-200306982
Will Product Launches Aid Boston Beer's (SAM) Q1 Earnings?
By Zacks Investment Research   |  Apr 18, 2018 10:49PM ET
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The Boston Beer Company, Inc. (NYSE:SAM) is slated to report first-quarter 2018 results on Apr 25. The company has been reeling under soft depletion trends due to persistent decline in the Samuel Adams and Angry Orchard brands. However, we remain confident about Boston Beer’s three-point growth plan focused on cost-saving initiatives, long-term innovation, and the revival of Samuel Adams and Angry Orchard brands.

A glimpse of the company’s earnings performance in the trailing four quarters shows that it has outpaced the estimates by an average positive surprise of 48.9%. Nevertheless, Boston Beer delivered a negative earnings surprise of 10.6% last quarter.

The Boston Beer Company, Inc. Price, Consensus and EPS Surprise

The Boston Beer Company, Inc. Price, Consensus and EPS Surprise | The Boston Beer Company, Inc. Quote

Although the Zacks Consensus Estimate of 38 cents for the impending quarter remained stable in the last 30 days, the same reflects a year-over-year decline of 15.6%.

So, let’s find out what’s in store for Boston Beer in the upcoming first-quarter earnings release.

Things You Should Know

Boston Beer has been grappling with lower depletions and shipment volumes since last few quarters. In fact, volumes declined in all four quarters of 2017. Apparently, depletions fell 10% in the fourth quarter and 7% in 2017. Softness in depletion volumes mainly stems from the weakness in Samuel Adams and Angry Orchard brands as well as soft hard cider category.

Depletions for the year-to-date period through the six-week period ended Feb 10, 2018, are estimated to have grown nearly 6% from the comparable year-ago period. Despite a bullish shipments and depletions outlook for 2018, the company expects volumes to be sensitive to innovations that might hurt top and bottom lines. Evidently, lower shipment volumes along with decline in depletion volumes marred sales in the previous quarter. As a result, top line declined 6% year over year.

Also, industry-wide challenges related to general softening of the craft beer and hard cider categories as well as increased entry of start-up brewers might hurt the company’s performance.

Nevertheless, Boston Beer’s growth plan that includes the revival of the Samuel Adams and Angry Orchard brands via its packaging, innovation, promotion and brand communication initiatives is encouraging. Also, it recently launched new-media campaigns for the Samuel Adams and Angry Orchard brands and remains optimistic about other new innovative product such as Sam '76, Samuel Adams New England IPA. Further, management expects to sustain momentum for its Twisted Tea brand and gain leadership for Truly Spiked & Sparkling brand in the hard sparkling water category. Also, its cost-saving initiatives that led to margin expansion bode well.

Notably, analysts surveyed by Zacks expect first-quarter revenues to be $172.1 million, up 6.5% year over year. Moreover, the estimate for shipment volume is likely to increase 5% from the year-ago period.

In the past three months, Boston Beer has gained 19.1% against the industry’s decline of 2.7%. Robust initiatives led to the stock's impressive performance.

Given these mixed aspects, let’s wait and see whether the company’s initiatives sail it through soft depletions and shipment volumes or these concerns will continue to persist.

Zacks Model

Our proven model shows that Boston Beer is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boston Beer’s Earnings ESP of +35.65% and Zacks Rank #3 make us reasonably confident of an earnings beat.

Other Stocks Likely to Deliver Earnings Beat

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

Hostess Brands, Inc. (NASDAQ:TWNK) has an Earnings ESP of +10.87% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molson Coors Brewing Company (NYSE:TAP) has an Earnings ESP of +1.03% and a Zacks Rank of 3.

Church & Dwight Co., Inc. (NYSE:CHD) has an Earnings ESP of +0.71% and a Zacks Rank #3.

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

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

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Zacks Investment Research
Will Product Launches Aid Boston Beer's (SAM) Q1 Earnings?
 

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Will Product Launches Aid Boston Beer's (SAM) Q1 Earnings?

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