Like Paul Revere setting out on a particularly wild ride, shares of Boston Beer (NYSE:SAM) are off to the races this morning -- up 14% as of this writing. The whip goading the horse: an update from the company, on trends in earnings and "depletions growth."
Don't let that item throw you, by the way. "Depletions growth" is a term of art in the beer industry. It refers to the rate at which beer, already shipped from a producer like Boston Beer to a distributor, leaves the distributor's warehouse en route to end users. I.e., drinkers.
So now that we know what depletions growth is, let's find out what it is... for Boston Beer.
According to Boston Beer's press release, full-year depletions in 2012 are running anywhere from 11% to 13% higher than they were in 2011. What's more, depletions are expected to grow 10% to 15% in 2013. Management confirms that shipments are "increased" this year, and further down the supply chain, sales look similarly strong -- strong enough that Boston Beer just boosted its earnings projections by approximately 11% over prior expectations, to anywhere from $4.30 to $4.60 per share.
The good news doesn't stop there. If you take the midpoint of Boston Beer's growth projections, this year's 12% rise in depletions is soon to be followed by about a 12-point-five percent rise in 2013. In other words, growth is accelerating, not slowing down.
That's great news for Boston Beer shareholders. In a nutshell, if sales (er, "depletions") alone are growing at 12%, this means that analyst projections of 9% long-term earnings growth for the company are almost certainly short of the mark. And if sales growth is accelerating, this suggests strong demand and little prospect of price declines. So earnings growth should certainly be higher than 12% -- not lower.
That could be good news for folks other than Boston Beer. Because if beer consumption is growing, generally, Anheuser-Busch Inbev (NYSE:BUD) and Molson Coors (NYSE:TAP) could benefit from that trend as well.
On the other hand, not everyone's a winner here. Unless you subscribe to the theory that Americans are drinking more, period, then a shift to higher beer consumption could well indicate a shift away from hard liquor and wine.