Investor enthusiasm is bubbling heading into the fourth-quarter earnings report by Boston Beer (NYSE:SAM). There are some good reasons for optimism, considering the alcoholic-beverage specialist is riding a wave of consumer demand for hard seltzers and teas. Its hit brands in these niches -- especially Truly -- have helped Boston Beer post surging sales growth that once again demonstrates its ability to capitalize on shifting beverage preferences.

That enviable market position has been tested in recent months by a flood of new competitors in the hard seltzer space. With that in mind, let's look at the metrics that might determine whether investors can expect more heady returns for Boston Beer when it announces earnings results on Wednesday, Feb. 19.

Friends drinking beer at a bar.

Image source: Getty Images.

Hard seltzer update

Most investors who follow the stock are expecting sales to soar 24% to $280 million, but that metric doesn't begin to tell the story behind Boston Beer's operating success. For that, keep a watch on depletions, a measure of retailing volume. That figure should land at around 21% for the company's entire portfolio, including the recently acquired Dogfish Head brands. The core brands should grow at a slightly slower pace of roughly 17% for the full year.

The key demand question is the Truly hard seltzer brand, which has enjoyed triple-digit volume growth in recent quarters. That success is a testament to Boston Beer's ability to innovate, market, and distribute standout products. But wins like that tend to attract major competition. Every beer and wine giant is getting in the seltzer game, in fact.

We'll find out on Wednesday whether Truly's sales are holding up more like Twisted Tea, which has defended its market share position, or like the hard cider Angry Orchard, which is losing ground to the flood of rivals.

Operating income

Boston Beer is generating much higher profits recently. Through the first nine months of 2019, operating income passed $127 million to mark a 46% increase year over year.

Yet it is facing a few big financial challenges, including production and packaging bottlenecks. The company last quarter had to pay extra to circumvent those issues by relying on third-party brewers. That initiative allowed Boston Beer to keep capturing rising demand, but gross profit margin fell. The company is working hard to raise its own capacity, but until it does, shareholders might see relatively weak earnings growth.

The updated outlook

CEO Dave Burwick and his team issued a big-picture 2020 outlook back in late October that's likely to get more concrete this week. As it stands now, Boston Beer is predicting depletion growth from 19% to 22%. Prices should rise by about 2%, but gross profit margin should still hold steady at about 50% of sales.

The company is planning aggressive spending, both in supporting its hit brands on the marketing side and on raising brewer capacity. These initiatives point to sluggish profits in 2020, but investors aren't likely to worry about that fact as long as Boston Beer can continue outpacing its bigger alcoholic-beverage rivals and set the pace for this key consumer staples niche.