Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: Shares of Boston Beer Co Inc (NYSE:SAM) were down 16.8% as of 11:43 a.m. EST Wednesday after the craft brewer released mixed fourth-quarter results and light forward earnings guidance.
Quarterly revenue rose 6% year over year to $217.8 million, which translated to a 5.5% increase in net income to $19.1 million, or $1.40 per share. Analysts, on average, were expecting slightly lower earnings of $1.37 per share on higher sales of $236 million.
Depletions growth during the quarter also decelerated sequentially from 21% to 13%. (Depletions is an industry measure for how quickly the company's products travel from warehouses to consumer outlets.) But keep in mind management already warned this was an expected result stemming from more difficult year-over-year comparisons and a lack of new product launches in the second half of 2014. For the full year, depletions grew a solid 22%, within Boston Beer's guidance range of 20%-24%.
Speaking of which, Boston Beer's 2014 revenue climbed 22% to $903 million, which resulted in a 29% boost in net income per share to $6.69. Once again, the top line here fell short of Wall Street's consensus of $920.4 million. But earnings came in well ahead of both Boston Beer's guidance for EPS between $6.00-$6.40, and analysts' expectations for $6.60 per share.
However, Boston Beer also told investors to expect 2015 earnings per share between $7.10-$7.50, below the $7.96 for which Wall Street had hoped.
Why it's happening: Driving those results, Boston Beer says, will be depletions growth of between 8%-12% -- a reduction from the 10%-15% range Boston Beer forecast three months ago -- as well as consistent national price increases of between 1% and 2%. Boston Beer also increased the top end of its estimated 2015 capital spending range by $10 million, resulting in a new range of $80 million-$110 million. That includes additional capital investments of between $3 million and $5 million in its Alchemy and Science brands, the end goal of which I noted in my more comprehensive earnings take is actually encouraging for patient investors.
We should also keep in mind Boston Beer's penchant for under-promising and over-delivering, which means analysts are likely to take its lighter-than-expected guidance with a grain of salt. In the end, Boston Beer stock certainly doesn't look "cheap" trading around 38 times trailing-12-month earnings even after Wednesday's drop. But considering the company not only still commands just a small slice of its target market, but also continues to deliver on its bottom-line promises to shareholders, I'm convinced Wednesday's report contains nothing to negatively change Boston Beer's long-term story.