Boston
Beer
Boston Beer has been the toast of the markets these past two days. Shares are up more than 30% since the brewer released its report. Investors are celebrating the report, but it's the mirror image of what occurred back in November, when the patriotic brewer missed analyst estimates. The stock dove 25% that day. And therein lies the problem for investors who might wake up to find their beer skunked.
Sales of craft beers have been resilient so far, even in this tough economic period. Even though the cost of a six-pack keeps rising to help offset costs, core shipment volumes still rose 16.9% for the year. Yet where the company sees core shipments rising up 10% so far for the first quarter of 2008, it has also revised forecasts for expenses upwards as well. It now sees production costs climbing 12% to 16% this year, up from the 10% to 14% it called for in November.
That upward trend will continue to siphon off Boston Beer's margins. It's not the worst of the bunch, but when you compare what its market multiple is to its rivals and then look at where it sits based on quarterly profit margins, Boston Beer is indeed a premium-priced brewer.
|
Company |
12/06 |
3/07 |
6/07 |
9/07 |
12/07 |
P/E Ratio |
|---|---|---|---|---|---|---|
|
Boston Beer |
3.4% |
8% |
7.3% |
3.8% |
7.3% |
31 |
|
Anheuser-Busch |
5.6% |
13.4% |
15% |
15.3% |
5.8% |
17 |
|
Molson Coors |
7.3% |
1.6% |
11% |
8% |
11% |
19 |
I've already cracked open a cold Sam Adams in celebration of its robust quarterly performance, but I'd abstain from its stock, since there may very well be an opportunity to bring home a case of shares at a much better price later on.
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