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Boston Beer (SAM) Reports Q1 Loss, Lags Revenue Estimates

The Boston Beer Company, Inc. SAM has reported dismal first-quarter 2023 results, wherein the top and bottom lines declined year over year and missed the Zacks Consensus Estimate. Results have also lagged our estimates. The soft performance mainly resulted from declines in shipments and depletions, as well as continued challenges in the hard seltzer category. An unfavorable product mix and supply-chain inefficiencies also affected the company in the quarter under review.

The adjusted loss per share of 73 cents in first-quarter 2023 was wider than the year-ago quarter’s loss of 16 cents. The loss figure was also wider than the Zacks Consensus Estimate of a loss of 32 cents and our estimate of a loss of 49 cents. This mainly resulted from the dismal sales performance, owing to a decline in shipments and depletions, as well as the impacts of higher operating expenses.

Net revenues declined 4.7% year over year to $410 million and missed the Zacks Consensus Estimate of $418 million. The figure also lagged our estimate of $422.6 million. Excluding excise taxes, the top line fell 4.8% year over year to $435.2 million and missed our estimate of $449.4 million.

The shipment volume declined 7.6% to 1.6 million barrels in the first quarter, while depletions fell 6% in the first quarter. The decline in shipment and depletion resulted from the soft performances of the Truly Hard Seltzer, Angry Orchard, Samuel Adams, and Dogfish Head brands. These were partly negated by growth in the Twisted Tea and Hard Mountain Dew brands.

The Zacks Rank #3 (Hold) stock has declined 16.2% in the past three months against the industry’s 7.3% growth.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Costs & Margins

The gross profit declined 10% year over year to $155.7 million, whereas the gross margin contracted 220 basis points (bps) to 38% from 40.2% in the year-ago quarter. Higher inventory obsolescence costs and higher brewery processing mainly hurt the company’s gross margin, offset by price increases. The rise in inventory obsolescence costs mainly resulted from rebranding Truly Vodka Seltzer to Truly Vodka Soda, and a non-recurring payment to a third-party contract brewery. These factors resulted in an unfavorable impact of 210 bps on the gross margin.

Advertising, promotional and selling expenses declined 4% in the reported quarter to $125.4 million due to lower freight to distributors of $12.6 million on reduced rates and volumes. This was partly offset by higher brand investments of $7.4 million mainly related to investments in local marketing, as well as elevated salary and benefit costs.

General and administrative expenses increased 10.1% year over year to $43.7 million mainly due to increased consulting costs.

The Boston Beer Company, Inc. Price, Consensus and EPS Surprise

 

The Boston Beer Company, Inc. Price, Consensus and EPS Surprise
The Boston Beer Company, Inc. Price, Consensus and EPS Surprise

The Boston Beer Company, Inc. price-consensus-eps-surprise-chart | The Boston Beer Company, Inc. Quote

Financials

As of Mar 31, 2023, Boston Beer had cash and cash equivalents of $122.6 million, and total stockholders’ equity of $1,041.4 million. The company currently has $150 million in its line of credit, which, along with its cash position, will be sufficient to meet cash requirements.

The company repurchased shares worth $27.5 million from Jan 3, 2023, to Apr 21, 2023. Of this, it bought back shares worth $21.9 million in first-quarter 2023 and $5.6 million so far in the second quarter. As of Apr 22, 2023, the company had $62.8 million remaining under its existing share repurchase authorization worth $931 million. For 2023, capital spending is anticipated to be $100-$140 million.

Outlook

The company reiterated its guidance for 2023. Boston Beer envisions GAAP earnings per share of $6.00-$10.00 for 2023. The company’s adjusted earnings per share guidance excludes the impacts of ASU 2016-09.

Depletions and shipments are expected to decline 2-8%. This view includes the adverse impacts of 1% due to an additional 53rd week in fiscal 2022 and fiscal 2023 will have 52 weeks. On a 52-week comparable basis, the company expects depletions and shipments to decline 1-7%.

SAM anticipates a gross margin of 41-43%. The company expects a year-over-year gross margin improvement in the second half of 2023 due to the expected timing of cost-reduction efforts and the timing of obsolescence expenses recognized in 2022.

Advertising, promotional and selling expenses are expected between down $5 million and up $15 million in 2023. This does not include any change in freight costs. The non-GAAP effective tax rate is anticipated to be 28%, excluding the impacts of ASU 2016-09.

The Truly brand is predicted to show signs of improvement in the second half of this year. The 2023 overall volumes are likely to decline due to continued weakness in Truly volume, which is expected to partly offset strong growth in Twisted Tea.

For the first quarter of 2023, shipments are likely to be at the low end of 2023 guidance, backed by the launch of Truly Margarita.

Consumer Staple Stocks Worth a Look

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Vita Coco Company COCO, Coca-Cola KO and The Duckhorn Portfolio NAPA.

Vita Coco currently flaunts a Zacks Rank #1 (Strong Buy). COCO has a trailing four-quarter earnings surprise of 21.7%, on average. The company has rallied 60.1% in the past three months.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vita Coco’s current financial-year sales and earnings per share suggests growth of 10% and 178.3%, respectively, from the year-ago quarter’s reported figure. The consensus mark for COCO’s earnings has been unchanged in the past 30 days.

Coca-Cola currently has a Zacks Rank #2 and an expected long-term earnings growth rate of 6.8%. KO has a trailing four-quarter negative earnings surprise of 4.2%, on average. The company has gained 5% in the past three months.

The Zacks Consensus Estimate for Coca-Cola’s current financial-year sales and earnings suggests growth of 4.5% and 4.8%, respectively, from the year-ago reported numbers. The consensus mark for KO’s earnings per share has been unchanged in the past 30 days.

Duckhorn currently has a Zacks Rank of 2. NAPA has a trailing four-quarter earnings surprise of 13.5%, on average. It has a long-term earnings growth rate of 6.6%. The company has declined 7.2% in the past three months.

The Zacks Consensus Estimate for Duckhorn’s current financial-year sales and earnings per share suggests growth of 8.4% and 1.6%, respectively, from the prior-year reported numbers. The consensus mark for NAPA’s earnings per share has been unchanged in the past 30 days.

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