Shares of The Boston Beer Company (NYSE:SAM) fell as much as 15.5% lower on Friday on the heels of a disappointing second-quarter report. By 2:40 p.m. EDT, the beer brewer's stock had recovered slightly to an 11.9% decline.
The brewer best known for the Samuel Adams line of mass-market craft beers reported second-quarter sales of $273 million, 10.2% above the year-ago period's reading. On the bottom line, earnings fell 16%, to land at $1.98 per diluted share. Your average analyst had been looking for earnings near $2.81 per share on revenues in the neighborhood of $273 million. Boston Beer hit one of these targets on the nose while falling far short of the other.
Looking ahead, management held their full-year earnings target steady at approximately $6.80 per share. The current Street view of the same metric is aiming for $7.86 per share.
Boston Beer delivered solid second-quarter sales by running its breweries at full capacity in peak periods, going as far as getting more help than usual from third-party breweries to handle the heaviest order volumes. This effort stressed out the company's supply-chain logistics.
When this is coupled with rising ingredient costs and an expanded marketing budget, the bottom line had to suffer. The effects linger on into the third quarter as Boston Beer grapples with the relatively nice problem of managing a rapidly growing business.
As of Thursday's closing bell, Boston Beer's investors had enjoyed a skyrocketing 133% return over the previous year. The stock has still doubled in 52 weeks when you include today's sudden correction, and shares are trading at a frothy 38 times trailing earnings.
It's no surprise to see investors taking some of the fizz out of this stock against that backdrop, particularly when presented with a frustrating short-term earnings picture.