Why Craft Brewers Alliance Inc.'s Shares Popped 69% in August

Earnings and a new distribution agreement had Craft Brewers Alliance Inc.'s shares shooting higher last month.

Travis Hoium
Travis Hoium
Sep 7, 2016 at 8:23AM
Consumer Goods

Image source: Getty Images.

What happened

Shares of beer company Craft Brewers Alliance Inc. (NASDAQ:BREW) jumped an incredible 69.1% in August, according to data provided by S&P Global Market Intelligence, after reporting earnings and a major partnership.

So what

Second-quarter earnings results got the stock off on the right foot last month. Revenue rose 6.4% to $62.3 million and net income jumped 63% to $2.3 million, or $0.12 per share, on the back of the largest depletions in company history.  

What really charged shares was an agreement with Anheuser-Busch (NYSE:BUD) for an extended master distribution agreement and new contract brewing and international distribution agreements. The deal will keep Craft Brewers Alliance beer in Anheuser-Busch's distribution network domestically as well as add international markets. The contract brewing deal will transition up to 300,000 barrels of volume to Anheuser-Busch's breweries, which will hopefully lower costs.  

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Now what

In a world where beer companies are gaining more scale to squeeze out smaller competitors, it's almost a necessity for a company like Craft Brewers Alliance to partner with a major brewer. That's why the market liked the Anheuser-Busch tie-up so much. Now, the companies have to realize cost benefits and grow sales internationally. If those two things happen, we could see shares continue to rise in the future.