3 Reasons Why You Must Hold On To Boston Beer (SAM) Stock
Zacks Investment Research | Mar 31, 2019 10:45PM ET
The Boston Beer Company Inc. (NYSE:SAM) displays mixed sentiments. Robust quarterly performances driven by consistent momentum in shipment volumes and depletions have been providing a boost to the stock’s performance. We believe that there is momentum left in the stock, courtesy of its vast non-beer portfolio — including the Twisted Tea, Truly Spiked & Sparkling, and Angry Orchard brands. However, softness in the Samuel Adams brand, and higher packaging and transportation costs remain headwinds.
Let’s delve deeper and find out reasons why we should retain this stock now.
Strong Depletions Aid Quarterly Performance
Boston Beer has been witnessing sturdy depletions growth for a while now, which is aiding its top-line performance. In fourth-quarter 2018, revenues improved on the back of a 6.3% improvement in shipment volumes and 11% depletions growth. Depletions growth can be primarily attributed to major innovations, quality and strong brands alongside solid sales execution and support from distributors. Strength in the Twisted Tea, Truly Hard Seltzer and Angry Orchard brands also aided depletion growth, somewhat offset by fall in the Samuel Adams brand. Depletions for the year-to-date period through the six weeks (ended Feb 9, 2019) have improved nearly 12% from the comparable year-ago period.
In fact, the company is poised well to deliver significant depletions growth in future backed by expansion of distribution and customer base for the Truly brand, investment plans in packaging for the Angry Orchard Rose, and the emerging unit of Hard Seltzer brand’s leadership position. Additionally, the Twisted Tea brand continues to deliver double-digit volume growth owing to its increasing distribution and velocity. Based on the favorable trends witnessed in 2018, the company projects depletions and shipments to grow 8-13% in 2019.
Robust Surprise Trend & Outlook
Boston Beer displays solid top- and bottom-line trend, which continued in the fourth quarter of 2018. While the company has surpassed earnings estimates in seven of the trailing nine quarters, it delivered positive sales surprise in five out of the last seven quarters. Driven by impressive quarterly results, the company expects double-digit growth in revenues and robust increase in operating income during 2019. Adjusted earnings per share are now envisioned to be $8-$9, up from $7.47 earned last year.
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise
industry ’s decline of 22.4%. Meanwhile, stocks like Molson Coors Brewing Company (NYSE:TAP) , Constellation Brands (NYSE:STZ) and Anheuser-Busch InBev SA/NV (NYSE:BUD) have witnessed declines of 18.4%, 23.2% and 22.1%, respectively, in a year.
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This Zacks Rank #3 (Hold) company’s long-term impressive earnings growth rate of 10% and a Growth Score of A are added positives. You can see Zacks Investment Research
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