The Boston Beer Company, Inc. SAM posted third-quarter 2024 results, wherein the bottom line surpassed the Zacks Consensus Estimates, while the top line missed the same. Both net sales and earnings increased from the year-ago period. Results benefited from price increases, lower returns and improved margins, offset by soft volume trends for Truly Hard Seltzer.
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The craft brewer reported third-quarter adjusted earnings per share (EPS) of $5.35, exceeding the Zacks Consensus Estimate of $4.96 per share. EPS also marked an increase of 14.1% from $4.66 per share posted in the year-ago quarter.
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
Net revenues of $605.5 million marginally gained 0.6% from the prior year quarter and missed the Zacks Consensus Estimate of $606 million. The increase is attributed to higher prices and lower returns, partly negated by lower volumes. Excluding excise taxes, the top line increased 0.4% year over year to $642.1 million.
Shares of this Zacks Rank #4 (Sell) company have gained 3.7% in the past three months compared with the industry’s growth of 2.7%.
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Analyzing SAM’s Quarterly Performance
Boston Beer reported a 1.9% year-over-year decline in shipment volume to 2.2 million barrels in the third quarter of 2024. Depletions volume fell 3% year over year. The decline in shipments resulted from the weak performance of Truly Hard Seltzer, partly offset by growth in the Twisted Tea, Sun Cruiser and Hard Mountain Dew brands.
As of Sept. 28, 2024, distributor inventory averaged five and a half weeks, which was slightly elevated compared with the targeted four to five weeks. This increased inventory is expected to result in lower fourth-quarter shipment volume.
The gross profit improved 2.1% year over year to $280.2 million, whereas the gross margin expanded 60 basis points (bps) to 46.3% from 45.7% in the year-ago quarter. The gross margin benefited from higher prices, procurement savings and lower returns, which outweighed the impact of elevated inventory obsolescence and increased inflationary costs. The company’s gross margin included $0.3 billion of shortfall fees and $6.1 million of non-cash expenses related to third-party production pre-payments, impacting the gross margin negatively by 10 bps and 100 bps, respectively, in the third quarter.
Advertising, promotional and selling expenses declined 3% in the third quarter to $148 million due to lower freight to distributors of $2.8 million on improved efficiencies and lower volumes. In the quarter, the company revealed that brand and selling costs declined by $1.8 million due to reduced salaries and benefits.
General and administrative expenses increased 3.8% year over year to $43.8 million due to higher professional fees.
SAM’s Financial Snapshot
As of Sept. 28, 2024, Boston Beer had cash and cash equivalents of $255.6 million and total stockholders’ equity of $1.01 billion. 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 Class A common stocks worth $191 million for the year-to-date period through Oct. 18, 2024. As of Oct. 18, 2024, the company had $476 million remaining under its current share repurchase authorization of $1.6 billion.
What to Expect From Boston Beer in 2024?
Boston Beer updated its guidance for 2024. The company envisions GAAP earnings per share of $5.50-$7.50 for 2024 compared with $7.00-$11.00 expected earlier. Non-GAAP EPS is expected to be $8.00-$10.00. Depletions and shipments are expected to decline in the low single-digits, versus the previous projection of a decline of low single-digits to zero. The company estimates a price hike of 2% for 2024, at the higher end of the prior view of a 1-2% increase.
SAM anticipates a gross margin of 44-45% for 2024 compared with 43-45% mentioned earlier. The company's gross margin guidance includes the negative impacts of 65-75 bps from shortfall fees and 95-105 bps from non-cash expenses of third-party production pre-payments.
Advertising, promotional and selling expenses in 2024 are expected between $5 million and $15 million. This does not include any change in freight costs for the shipment of products to distributors. The company anticipates an effective tax rate of 30% for 2024 compared with the prior estimate of 28.5%. Capital spending is expected to be $80-$95 million for 2024 versus $90-$110 million expected earlier.
Three Stocks Looking Good
We have highlighted three better-ranked stocks in the broader sector, namely Freshpet, Inc. FRPT, Vital Farms VITL, and Coca-Cola Europacific Partners CCEP.
Freshpet, a pet food company, has a trailing four-quarter earnings surprise of 132.9%, on average. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Freshpet’s current financial year sales and earnings indicates growth of 26.2% and 202.9%, respectively, from the prior-year reported level.
Vital Farms, which provides pasture-raised products, currently sports a Zacks Rank #2 (Buy). VITL has a trailing four-quarter average earnings surprise of 82.5%.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales and earnings indicates growth of 26.3% and 88.2%, respectively, from the prior-year reported level.
Coca-Cola Europacific Partners produces, distributes and sells a range of non-alcoholic ready-to-drink beverages. CCEP carries a Zacks Rank #2.
The consensus estimate for Coca-Cola Europacific Partners' current financial year’s earnings per share indicates growth of 6.5% from the year-ago reported figures. The consensus sales estimate suggests a year-over-year growth of 25.9%.
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The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report
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Vital Farms, Inc. (VITL) : Free Stock Analysis Report
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