• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Is Boston Beer Co. Coming Back to Life?

As long as their marketing investment continues to yield desirable results, I think it's a good play,
By DAVE BUTLER
Apr 25, 2019 | 01:18 PM EDT
Stocks quotes in this article: SAM

Shares of The Boston Beer Co. (SAM)  were surging after reporting some pretty nice first quarter results. The king of American craft beer, SAM has really struggled to create meaningful growth in the past few years as the craft market progressively becomes more and more saturated. More recently, renewed marketing efforts, combined with a few changes within management, seem to be leading to a bit of a revival.

Revenues increased 32.1% year over year to $251.7 million. The company credited the $61.2 million increase to a 32.5% jump in shipments. Gross margins were off by about 1%, as costs did increase in relation to increased production and higher labor costs. What I really like about the quarter is the strong improvements in operating income. Operating income increased 218% to $29.4 million. I had held some concerns that increasing advertising, promotional, and selling expenses would limit the potential here. While the fourth quarter was strong, the company finished 2018 with a decrease in annual earnings, and stagnant operating margins. One quarter didn't seem like enough to go on. The first quarter of 2019 dissuaded much of those concerns, and a trend is forming.

You know the company had a good quarter when they produced great gains in net income despite an increase in tax provisions from a benefit $152,000, to a provision of $6.13 million. Net income of $23.69 million represents a 154% increase year over year. That income breaks down to $2.02 per diluted share vs. $0.78 per share the previous year.

For 2019, Boston Beer is forecasting price increases of 1%-3%. This does concern me a bit, as I'd like SAM's revenue growth to stem from unit sales, rather than price per unit. The company expects depletions and shipments to increase 10%-15%, and they expect full year gross margins of 50%-52%. In keeping with the return to aggressive marketing, they are forecasting advertising, promotional, and selling expenses to increase by $20-$30 million. As long as this marketing investment continues to yield desirable results, I think it's a good play. They have the leverage to out promote smaller names and that's what they need to do.

Though Boston Beer noted that forecasts could change significantly, they're projecting full year 2019 Non-GAAP earnings of $8.00-$9.00 per share. Going off of these Non-GAAP earnings, the stock is trading at roughly 37.5x full year Non-GAAP earnings forecasts. It's tough to compare since we don't know what will happen in terms of diluted earnings, but if you reference historical P/E ratios for SAM, 37.5x isn't very low.

The makeups of their sales are a bit dissatisfying as well. Chairman Jim Koch noted that there is a continuing poor trend for their flagship Sam Adams beer lineup, while CEO Dave Burwick noted that the strong 11% increase in depletions was the result of hard ciders and the Twisted Tea brand, while the company experienced decreases in Sam Adams and Angry Orchard.

Now back to my question from the beginning. Is Boston Beer Co. coming back to life? Well, in a financial sense, yes it is. Ironically the growth isn't coming from "Boston Beer's". It makes sense in a way. The massive increase in the number of craft brewers these days makes it very difficult for SAM to really push the Samuel Adams vehicle. In a way, their problem is of their own making. The company made craft beer cool in America, and inspired many others to start their own enterprise.

With so many players it's more difficult for Boston Beer to gain market share for its Samuel Adams brand. I for one love a good Boston Lager. It is by far my favorite beer. But the plethora of options is giving consumers a lot of choices. That doesn't work well for Boston Beer Co. The future may very well lie in slightly specialized products like twisted tea. Either way, it's good to see the company getting a few quarters of life again. The valuation makes it difficult to call it a "buy" for me, but I do view it as a good "hold" based off of current trends.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Dave Butler had no position in the securities mentioned.

TAGS: Earnings | Investing | Markets | Stocks | Trading | Beverages

More from Investing

Watch for the Possible Resumption of the Rally in Marathon Digital

Carolyn Boroden
Apr 19, 2021 8:30 AM EDT

I'm looking for a buy 'trigger' against the support and timing.

QuantumScape Charts Remain Bearish and Present New Downside Targets

Bruce Kamich
Apr 19, 2021 8:04 AM EDT

Shares of the maker of solid-state batteries point could weaken further based on its technical signals.

Bitcoin Stabilizes, COVID Update, Earnings So Far, Apple Event

Stephen Guilfoyle
Apr 19, 2021 7:40 AM EDT

The marketplace responded well to the first week of earnings season, or should we say what we saw beyond the banks that dominated.

Free Buying Power: An Underappreciated Asset

Paul Price
Apr 19, 2021 7:00 AM EDT

Let's look at this little understood and little used principle of investing, using TILE and MIK as examples.

Tricky Technical Conditions Persist as Substantial News Flow Starts to Hit

James "Rev Shark" DePorre
Apr 19, 2021 6:47 AM EDT

It's easy to be caught on the wrong side of the rotations if you aren't careful.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:05 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How recency bias and the Pareto Principle impact y...
  • 02:42 PM EDT PAUL PRICE

    Wednesday on Real Money Pro

    Make this stock a 'part' of your portfolio.
  • 04:44 PM EDT PAUL PRICE

    Pretty Incredible + Hard to Believe

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login