What the heck is the market thinking? After Boston Beer (SAM 0.28%) reported earnings last week, investors pushed the craft brewer's stock some 20% higher. While there were signs a few things had improved, this financial report was no cause for raising a frothy mug to cheer the results. Quite likely, the gains will eventually taste as sour as skunked beer.

Heading in the right direction

Sure, there were positive developments. Depletions that had been down 14% in the first quarter were down only 3% in the second (depletions are sales to distributors and retailers, and are considered an industry proxy for demand). And while it sold 1,000 fewer barrels this year than it did in the same period in 2016, it shipped 372,000 more barrels of beer during the second quarter than it did in the first.

Boston Beer founder and chairman Jim Koch

Image source: Boston Beer.

CEO Martin Roper said during the brewer's earnings conference call with analysts, "The year-to-date number, through July, is indicative that the trends have significantly changed from the first quarter."

Revenues came in at $264.7 million compared to $261.2 million last year, while earnings rose to $29.1 million, or $2.35 a share, including a $0.02 per share tax benefit, from $26.6 million, or $2.06 a share, a year earlier.

Indeed, by all measures Boston Beer's first quarter was dismally disastrous, so the second quarter showed the brewer seemingly finding its footing again and putting itself in the right direction once more. Sort of.

Biggest brands still down

The craft brewer's core beverages are still in trouble. Both its flagship Samuel Adams beer and its Angry Orchard hard ciders continue to see falling depletions, and its hard soda brand Coney Island Brewing was also down. In fact, hard soda looks to have been little more than a fad that's quickly fading, or as chairman Jim Koch described it, it was a "boom-splat phenomenon."

Yet the rise and fall of hard soda is also holding back what was admittedly one of the few bright spots in Boston Beer's earnings report, hard seltzer. Truly Spiked & Sparkling, as well as Twisted Tea, a longtime frontrunner, showed increases in the quarter, but it's being hurt because retailers still have singed fingers from hard soda. Having committed shelf space to the one, only to see it flame out, they're more reluctant to repeat the experiment with the other.

Boston Beer's hard seltzer brand

Image source: Boston Beer.

Moreover, despite the limited success it's seeing with hard seltzer, even being described as one of the leaders in the emerging category, it's still a tiny niche product that hasn't even reached hard soda's size at its peak. It's so new, Roper admits, it may end up being nothing more than a seasonal drink, though there is always the possibility it could gain a lot of momentum.

A false impression

In short, Boston Beer's stock was bid up because the quarter looked so much better than the previous one, but that quarter was a train wreck. Instead of seeing this as a major improvement trend, investors would be better served looking at the first quarter as an outlier and the latest effort as more of a continuation of the stumbling results the craft brewer has experienced for awhile now.

It's certainly positive that Boston Beer's earnings reversed course this time around, rather than continuing down, but the report was not as good as investors seem to think.