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Boston Beer Makes Progress in Another Bitter Quarter

By Steve Symington - Feb 22, 2018 at 9:28PM

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Samuel Adams continues to underperform, but it wasn't all bad news for the craft brewer.

Boston Beer (SAM -4.44%) announced fourth-quarter 2017 results on Wednesday after the market closed. On the one hand, investors pursed their lips at the ongoing weakness of its core Samuel Adams and Angry Orchard brands. On the other hand, the craft brewing specialist highlighted improved industry trends, continued cost reductions, and predicted a return to growth later this year.

With shares down 13.6% on Wednesday as the market digested the news, let's take a closer look at how Boston Beer ended 2017.

Samuel Adams glass being filled at a tap


Boston Beer results: The raw numbers


Q4 2017*

Q4 2016**

Year-Over-Year Growth

Net revenue

$206.3 million

$219.4 million


Net income

$30.5 million

$22.2 million


Earnings per diluted share





What happened with Boston Beer this quarter?

Keep in mind these results were partially impacted by one less week in the quarter as compared to the same year-ago period.

  • Depletions -- a key metric for how fast Boston Beer's products travel from warehouses to consumer outlets -- fell 2% for the comparable 13-week period, improving from a 3.5% drop last quarter. The decline was primarily driven by decreases from Samuel Adams and Angry Orchard products, which were only partially offset by increases from the Twisted Tea and Truly Spiked & Sparkling brands.
  • Earnings included a favorable one-time impact of $1.72 per share related to the implementation in December of the Tax Cuts and Jobs Act of 2017. Adjusted for that item, Boston Beer's earnings were $0.85 per share -- falling short of investors' expectations for $0.90 per share.
  • Shipment volume slipped 7.7% to 898,000 barrels.
  • Gross margin was 52.4%, up 3.3 percentage points year over year.
  • Repurchased 179,000 shares of stock for $31.9 million, leaving $169.8 million remaining under Boston Beer's current buyback authorization.
  • Announced last week that Dave Burwick -- the former CEO of Peet's Coffee -- will replace current Boston Beer CEO Martin Roper in the second quarter.

What management had to say

According to Roper:

We are encouraged by the improving quarterly Company depletions trends since the first quarter of 2017 and are motivated further by a strong start in 2018. In the 2017 fourth quarter, Twisted Tea grew distribution and pull and Truly Spiked & Sparkling maintained its position as one of the leaders of the hard sparkling water segment.  Most of our volume declines for the quarter resulted from the continued underperformance of our Samuel Adams brand.  Our plans to improve our Samuel Adams trends include our new 'Fill Your Glass' integrated marketing campaign, which will be highly visible and amplified across media, digital and point of sale, along with a more focused sales execution on our primary Samuel Adams initiative, the national launch of Sam '76.

He added that while full-year 2017 depletions were below expectations, Boston Beer exceeded its targets for cost-savings and operational efficiency initiatives, allowing it the flexibility to continue investing in its brands even with depressed sales.

Furthermore, Roper noted that Burwick has served on Boston Beer's board since 2005 and boasts "an established track record of innovation and business success in the beverage and consumer goods industries."

Looking ahead

For the full year of 2018, Boston Beer expects earnings per share of between $6.30 and $7.30 -- the midpoint of which sits below investors' expectations for $7.25 per share -- assuming national price increases of between 0% and 2% and a change in depletions of flat to up 6%. Boston Beer also expects gross margin of between 52% and 54%, with the figure increasing over the course of the year driven by continued cost-savings initiatives. 

All things considered, this was a step in the right direction for Boston Beer as it works to return to sustained, profitable growth. But it's obvious the progress isn't coming fast enough for the market, especially given the sustained underperformance of Boston Beer's flagship Samuel Adams brand. So, with shares up nearly 60% from their 52-week low leading up to this report, it's no surprise to see Boston Beer stock pulling back today.

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The Boston Beer Company, Inc. Stock Quote
The Boston Beer Company, Inc.
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