Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Will Boston Beer Brew Up An Earnings Beat?

Boston Beer (NYSE: SAM  ) , the brewer driving America's craft beer revolution, has been a top performer over the last few years and investors hope to see more of this in 2014. The company is best known for its Samuel Adams brand, but it is also the mastermind behind the popular Angry Orchard hard cider brand. It is scheduled to release quarterly results on Feb. 25, so let's take a look at the current estimates and see if we should pick up positions right now.

The October blowout
Boston Beer released its third-quarter report on Oct. 30 and it blew past analysts' expectations on both the top and bottom lines; here's an overview:

Metric Reported Expected
Earnings Per Share $1.89 $1.82
Revenue $216.40 million $200.42 million

Boston Beer's earnings per share increased 19.1% and revenue rose 28.5%, driven by core shipment volume growing 29%. Gross profit increased 23.7% to $115.38 million, but the gross margin declined 300 basis points to 53% as the company faced increased processing and ingredient costs. The company noted strength in its Samuel Adams, Angry Orchard, and Twisted Tea brands as key drivers of growth and expects the strength to continue for the rest of the year. Overall, this was a great quarter for Boston Beer and I believe the momentum carried over and grew in the fourth quarter.

Expectations and what to watch for
Boston Beer's fourth-quarter results are due out after the market closes on Feb. 25 and analysts project substantial growth. Here's a breakdown of the estimates and a year-over-year comparison:

Metric Expected Year Ago
Earnings Per Share $1.51 $1.25
Revenue $193.70 million $153.00 million

These expectations call for the company's earnings per share to increase 20.8% and revenue to rise 26.6% year-over-year; this would be very similar to the performance Boston Beer had in the third quarter. Other than the key metrics, it will be crucial for the company to provide guidance for fiscal 2014 that is within or above analyst estimates; the current consensus estimate calls for earnings per share of $6.46 on revenue of $850 million. Also, I would like to see little to no decline in the gross margin, showing that the increased costs of processing and ingredients shown in the third quarter were passed on to the customer in the fourth quarter.

I believe these earnings expectations are attainable and they will actually be exceeded due to better-than-expected volume growth caused by the holiday season and the cold weather. I think Samuel Adams and Angry Orchard will lead the way again, as people kept their fridges stocked with these two popular brands for their many family dinners and the times when they were snowed-in. In terms of guidance, I think Boston Beer will provide in-line guidance, so the company can follow the popular "under-promise and over-deliver" method of forecasting.

Competitor's results due out a day later
On the day following Boston Beer's release, Anheuser-Busch InBev (NYSE: BUD  ) , the largest brewer in the world, will release a quarterly report of its own. A-B InBev is home to over 200 brands, 14 of which provide sales of over $1 billion per year; these include Budweiser, Bud Light, Stella Artois, Michelob Ultra, and Beck's.

A-B InBev's fourth-quarter results are due out before the market opens on Feb. 26 and analysts expect double-digit growth on both lines; here's an overview: 

Metric Expected Year Ago
Earnings Per Share $1.29 $1.12
Revenue $11.6 billion $10.3 billion

These estimates would result in earnings per share rising 15.2% and revenue increasing 12.6% from the same period a year ago. Investors should never underestimate the largest company in any industry, so I believe the company will meet expectations, led by the Budweiser and Bud Light brands. Like Boston Beer, it will be important for A-B InBev to provide an outlook for fiscal 2014 that is within expectations, which currently call for earnings per share of $5.33 on revenue of $47.7 billion. Overall, I still prefer Boston Beer over A-B InBev from an investment standpoint today, but it is a very close race.

Molson's slow-down is Boston's opportunity

On Feb. 13, Molson Coors (NYSE: TAP  ) released its fourth-quarter report and it showed that if the beer market grew, it was not because of its brands. The brewer behind brands such as Coors Light and Blue Moon reported earnings per share decreasing 1.5% and revenue decreasing 0.2%, as volume grew just 0.1% year-over-year. The one positive out of the company was a 16% increase in its quarterly dividend, from $0.32 to $0.37, but I do not think this outweighed the negatives; however, the market has reacted by sending the shares more than 4% higher. Overall, these were dismal results, but it presents the opportunity for Boston Beer to continue gaining ground on the competition. If Molson Coors can run higher on negative year-over-year growth, imagine what Boston Beer's stock could do if it shows 20%+ growth. 

The Foolish bottom line
Boston Beer is an American powerhouse and consumers cannot seem to get enough of its many brands. The stock has had a great run over the last year with a rise of more than 50%, and I think it can continue its run higher on strong earnings. The fourth-quarter report is due out on Feb. 25 and I believe Boston Beer will exceed analysts' expectations; this could propel the stock back toward its 52-week high, which it sits more than 15% below today, so investors should strongly consider initiating positions right now.

The Motley Fool's Top Stock for 2014
Boston Beer is a good stock that could generate substantial returns in 2014 and beyond, but there's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2840594, ~/Articles/ArticleHandler.aspx, 9/2/2015 8:15:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Joseph Solitro

A fan of innovation, strong fundamentals, and all things baseball. Follow on Twitter @JoeySolitro. Fool on!

Today's Market

updated Moments ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:01 PM
SAM $201.50 Up +4.45 +2.26%
Boston Beer CAPS Rating: ****
BUD $108.26 Up +2.19 +2.06%
Anheuser-Busch InB… CAPS Rating: ****
TAP $66.80 Up +0.50 +0.75%
Molson Coors Brewi… CAPS Rating: ****