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

By Travis Hoium – Sep 7, 2016 at 8:23AM

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

Image source: Getty Images.

What happened

Shares of beer company Craft Brewers Alliance Inc. (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 (BUD 2.79%) 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.  

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.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Anheuser-Busch InBev NV. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Anheuser-Busch InBev NV Stock Quote
Anheuser-Busch InBev NV
BUD
$58.17 (2.79%) $1.58
Craft Brew Alliance Stock Quote
Craft Brew Alliance
BREW

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