Boston Beer (NYSE:SAM), the maker of my favorite brew, Samuel Adams, will report second-quarter financial results tomorrow.

What analysts say:

  • Buy, sell, or waffle? Three analysts cover the brewer, and they've clinked their mugs together with a hold rating.
  • Revenues. Sales are expected to grow 6%, rising to $92.6 million.
  • Earnings. Profits, as well, are expected to grow 4% to $0.58 per share.

What management says:
The specialty brewer has been growing at a heady 27% pace over the past five years, and analysts expect growth to exceed 13% annually for the next five years. As it's added more niche beers to its cellar, Boston Beer has found it necessary to expand its operations as well. While it was originally going to build another brewery in Boston, it has opted instead to buy one already in place from Diageo (NYSE:DEO), where it has occasionally brewed some batches. Rising raw-material costs, particularly for the copper vats in which the frothy brews are made, have made building a brewery from scratch an expensive proposition. Although the repurposed plant won't come online until late next year, Boston Beer is laying the foundation for its next stage of growth.

What management does:
When you look at Boston Beer, you might think of other beermakers like Anheuser Busch (NYSE:BUD). But there's really little comparison between the two -- companies and beers alike. You can't argue with Budweiser's size and distribution reach, while finding even a Samuel Adams Light can be a real challenge sometimes. But there's a reason why Sam Adams beers continue to win taste-tests ahead of the King of Beers, or even my other favorite, Coors Light from Molson Coors (NYSE:TAP). As a result, Boston Beer's been able to keep operating and net margins improving in the face of decline gross margins.

Margin

04/06

07/06

09/06

12/06

03/07

Gross

58.5%

58.5%

58.0%

57.6%

57.1%

Operating

8.0%

9.5%

9.9%

10.8%

12.3%

Net

5.4%

6.2%

6.5%

6.4%

7.4%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
While I have an affinity for the beer, for some reason I've never bought the stock -- much to my chagrin. Its risen by nearly 50% over the past year. Boston Beer is the largest of the craft brewers, defined by the Brewer's Association as having less than 25% ownership by a non-craft brewing company, amongst other things. The category is popular enough -- it grew by 11% in 2006 -- that even Anheuser-Busch and Molson Coors want to edge into it. All breweries have been feeling the pinch of rising raw materials like barley, which makes up about 6% of beer's cost. Still, they've been able to offset those higher costs with price increases; Boston Beer pushed through a 2% hike last quarter.

Higher demand for its niche beer should allow the brewer with the faux-patriotic heritage to continue brewing up profits.

Related Foolishness:

Boston Beer has earned a five-star rating from the 60,000-strong investor intelligence community at Motley Fool CAPS. You can add your voice to the new stock rating service by joining today. It's free!

Anheuser-Busch is a recommendation of Motley Fool Inside Value. Diageo is a recommendation Motley Fool Income Investor. You can hoist a mug with any of the Fool's service with a 30-day free trial subscription.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool's disclosure policy is brewed with real malt and hops.