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Why Boston Beer Stock Gained 16% in March

By Demitri Kalogeropoulos – Apr 5, 2018 at 2:09PM

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The craft beer specialist believes it will return to growth in 2018, but investors are just as optimistic about rising profitability.

What happened 

Craft beer giant Boston Beer (SAM -3.15%) gained 16% last month, according to data provided by S&P Global Market Intelligence, compared to a nearly 3% decline in the broader market. 

^SPX Chart

^SPX data by YCharts

The rally contributed to solid gains for shareholders over the past year, yet the stock is well below all-time highs it set back in early 2015 of over $300 per share.

So what

March's increase came as investors debated whether the company was on the brink of a building recovery. Depletions, a measure of beer consumption, fell 5% in fiscal 2017 to push sales down for the second straight year.

Friends having a beer at a bar.

Image source: Getty Images.

However, that rate improved to just a 2% loss in the year's final quarter, leading management to forecast a return to modestly positive depletions in 2018.

Now what

Incoming CEO Dave Burwick and his team are hoping that innovative launches like Sam '76 and a new flavor in the Angry Orchard franchise will help counteract difficult industry trends, including the proliferation of small craft breweries and a shift in demand toward premium imported beers. 

That's possible, but what's easier to predict is the fact that cost cuts should power a second straight boost in profitability as gross margin improves to around 53% of sales this year from 51% in 2016.

Demitrios Kalogeropoulos owns shares of Boston Beer. The Motley Fool owns shares of and recommends Boston Beer. The Motley Fool has a disclosure policy.

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