Shareholders of Boston Beer (SAM 1.89%) are in for a volatile trading week. The company behind the Sam Adams, Truly, and Twisted Tea franchises is all set to announce second-quarter results on July 22.
Shares have dropped from 2021 highs on worries about mounting competition in hard seltzer. The company faces rising costs and a potentially rocky transition as people shift alcohol consumption back toward on-premises channels like bars and restaurants.
With that big picture in mind, let's look at three key trends to watch on Thursday for this booming business.
1. More market share wins
There has been a flood of activity in the hard seltzer category that powered Boston Beer's market-beating growth lately. Constellation Brands is pouring cash into the niche, for example, and aiming to make its Corona product one of the top three brands.
It's possible that this competition knocked Boston Beer off its game in the second quarter, but I wouldn't bet on it. The company faced down these rivals through 2020 and still managed to gain market share. That success convinced executives to ramp up shipments in recent weeks to prepare for a potentially blockbuster summer for Truly and other brands, including Dogfish Head and Angry Orchard. Most investors are looking for sales to jump 47% in the second quarter, on top of last year's 37% spike.
2. Risks to the business
It hasn't been all good news for Boston Beer's business, though. The Sam Adams craft beer franchise saw weak growth, and so did its wider restaurant and bar division in early 2021. It's an open question as to how the overall portfolio will fare as people return to more-normal drinking patterns. But if Constellation Brands' recent results are a good guide, then Boston Beer likely enjoyed a rebound in the restaurant and bar business even as retailer sales stayed strong.
Costs might be a bigger drag since Boston Beer still relies on third-party brewers to fulfill a lot of its volume needs. Input prices are rising on everything from labor to glass, too, adding pressure for the company to try to balance higher prices against its priority of soaking up market share.
Yet CEO Dave Burwick and his team will likely stress the temporary nature of this earnings crunch, which will disappear once production levels meet demand. Most investors are looking for earnings to reach $4.88 per share this quarter, and for Boston Beer to raise prices across its portfolio by as much as 3%.
3. The updated outlook
Any change to management's 2021 outlook would attract lots of investor attention on Thursday. As it stands, that forecast calls for depletions (a measure of consumer sales) to jump between 40% and 50% this year. That wide projection reflects uncertainty around consumer demand swings, competition, and supply chain challenges.
Boston Beer won't clear up all of these concerns on Thursday, but its latest results and updated outlook should help investors understand whether the business is on track for another year of market-leading growth. All signs support that bullish reading heading into this earnings announcement