Boston Beer (NYSE:SAM) announced second-quarter 2018 results on Thursday after the market closed, marking continued volume increases and accelerated growth in depletions -- a key industry metric that measures how quickly the craft brewer's products travel from warehouses to consumer outlets. But thanks to rising costs, that growth came at the expense of Boston Beer's profitability. Shares are currently down 13% in Friday's early trading in response.

Still, Boston Beer reiterated its previous full-year earnings outlook, indicating that the market may have simply mistimed the second quarter's share of its 2018 net income. Let's partake in a closer look at what Boston Beer accomplished over the past few months, then, and what investors should be watching in the coming quarters.

Closeup of six-packs of Samuel Adams Boston Lager


Boston Beer results: The raw numbers


Q2 2018

Q2 2017

Year-Over-Year Growth

Net revenue

$273.1 million

$247.9 million


Net income

$23.5 million

$29.1 million


Earnings per diluted share





What happened with Boston Beer this quarter?

  • This quarter's earnings included a $0.10-per-share tax benefit related to accounting standards for stock-based compensation adopted at the start of last year.
  • Revenue growth was driven by a a 9% year-over-year increase in shipment volume, to 1.2 million barrels.
  • Depletions grew 12% year over year, accelerating from the metric's 8% growth last quarter, driven by key product innovations, quality, and strength from Boston Beer's Truly Spiked & Sparkling, Twisted Tea, and Angry Orchard brands. That strength was partially offset by continued declines in Samuel Adams brand volume.
  • Gross margin dropped 2.1 percentage points year over year to 52%.
  • Repurchased 222,000 shares during the quarter for $50.5 million, leaving $128.1 million remaining under Boston Beer's buyback authorization as of July 20, 2018.

What management had to say

Boston Beer CEO Dave Burwick explained:

During the quarter, our operating expenses increased significantly, primarily due to the timing of our planned brand investments. Brand investment increases for the remainder of the year will moderate, as we maintain our annual spend guidance. Based on our first half results, we have increased our expectations for full year depletions growth, reflecting our view of the most recent trends.  We will continue to invest in capacity increases and our brewing and packaging capabilities to support our product innovation and brand growth.

Boston Beer founding chairman Jim Koch elaborated that the company is still striving to hone its Sam Adams' brand messaging, placing particular focus on its core Sam Adams Boston Lager and Seasonal offerings with the goal of returning the flagship brand to growth.

Looking ahead

In the meantime, Boston Beer reiterated its previous full-year outlook for adjusted earnings per share of between $6.30 and $7.30 -- though the variables underlying that range have changed slightly. On one hand, the company now expects depletions and shipments growth of between 7% and 12%, up from its previous guidance for between 0% and 6% growth. On the other hand, it also modestly reduced its full-year gross margin target to between 51% and 53%, compared to its prior goal for between 52% and 54%.

In addition, and though we don't usually pay close attention to Wall Street's demands, most analysts were significantly more optimistic in looking for Boston Beer to increase its full-year earnings guidance to roughly $7.95 per share. Perhaps this was a consequence of Boston Beer's big quarterly earnings beat in April, despite management urging caution and sticking with their conservative guidance at the time.

So while today's drop doesn't indicate as much, there's no denying that Boston Beer's underlying business took steps in the right direction this quarter. With shares still having more than doubled over the past year as of this writing, I think patient investors should be more than happy with its results.