Boston Beer (SAM) Stock Declines on Q4 Loss, Revenue Miss

The Boston Beer Company, Inc. SAM reported dismal fourth-quarter 2023 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. Additionally, the company reported a year-over-year decline in revenues, along with a widened loss per share. The decline mainly resulted from soft trends in the Truly brand, which caused lower shipments and depletions.

The company also noted that the fourth-quarter 2023 results included 13 weeks, while fourth-quarter 2022 had 14 weeks. This impacted its top and bottom-line performances.

The company’s loss per share of $1.49 in fourth-quarter 2023 was wider than the loss of 93 cents in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of earnings of 22 cents. The decline mainly resulted from soft top-line trends, accompanied by higher operating 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-eps-surprise-chart | The Boston Beer Company, Inc. Quote


Net revenues declined 12% year over year to $393.7 million and missed the Zacks Consensus Estimate of $416 million. The dip in the company’s fourth-quarter revenues included an impact of 8.9 percentage points from the 14th week in 2022. Additionally, the company’s fourth-quarter revenues reflected a $5.1-million impact of international sales tax adjustment. Its shipments and depletions declined year over year in the quarter. Excluding excise taxes, the top line dropped 12.3% year over year to $417.4 million.

On a 13-week comparable basis, net revenues declined 3.1% in the fourth quarter. Excluding the impacts of the international sales tax adjustments, net revenues fell 10.9% on a reported basis and 1.9% on a 13-week comparable basis.

Backed by the soft results, shares of Boston Beer declined 11.6% in the after-hours trading session on Feb 27, 2024. The Zacks Rank #3 (Hold) stock has lost 6.4% in the past three months against the industry’s 1.8% growth.

 

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Image Source: Zacks Investment Research

 

Quarter in Detail

The shipment volume declined 12.2% from the year-ago period to 1.5 million barrels in the fourth quarter of 2023, whereas depletions fell 9%. On a 13-week comparable basis, shipments and depletion dipped 3.5% and 1%, respectively. Decreased shipment and depletion resulted from declines in Truly Hard seltzer, partly negated by growth in the Twisted Tea, Samuel Adams Non-Alcoholic styles and Dogfish Head Canned cocktails.

The gross profit declined 10.6% year over year to $147.9 million, whereas it expanded 60 basis points (bps) to 37.6% from 37% in the year-ago quarter. The gross margin primarily benefited from strong price realization, reduced inventory obsolescence and procurement savings. This was partly offset by higher inflationary costs, third-party production shortfall fees and brewery processing costs per barrel due to lower volumes.

Advertising, promotional and selling expenses declined 7.6% in the reported quarter to $128.6 million due to lower freight to distributors of $11.8 million on reduced rates and volumes. This was partly offset by higher brand investments and selling costs of $1.2 million mainly related to increased media investments.

General and administrative expenses rose 5% year over year to $43.7 million mainly due to higher salaries and benefits costs.

The company reported an operating loss of $25.9 million compared with a loss of $16.8 million in the year-ago quarter.

Financials

As of Dec 30, 2023, Boston Beer had cash and cash equivalents of $298.5 million, and total stockholders’ equity of $1,077.9 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 Class A shares worth $92.9 million in 2023. From the start of 2024 through Feb 23, the company repurchased shares worth $35.6 million. This brought the total share repurchase since the beginning of 2023 to $128.5 million. As of Feb 23, 2024, the company had $230 million remaining under its existing share repurchase authorization worth $1.2 billion.

Outlook

Boston Beer envisions GAAP earnings per share of $7.00-$11.00 for 2024. Depletions and shipments are expected between a low-single-digit decline and a low-single-digit increase. The company estimates a price increase of 1-2% for 2024.

SAM anticipates a gross margin of 43-45% for 2024. The company's gross margin guidance includes the impacts of 50-75 bps from elevated shortfall fees and 125-150 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 27.5% for 2024. Capital spending is expected to be $90-$110 million for 2024.

Consumer Staple Stocks Worth a Look

We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Molson Coors TAP, Fomento Economico Mexicano FMX and Lamb Weston LW.

Molson Coors, a leading beverage company, currently flaunts a Zacks Rank #1 (Strong Buy). TAP has a trailing four-quarter earnings surprise of 37.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Molson Coors’ current fiscal-year sales and earnings suggests growth of 1.3% and 4.2%, respectively, from the year-ago reported numbers.

Fomento Economico Mexicano, alias FEMSA, participates in the beverage industry through Coca-Cola FEMSA, which is the world’s largest franchise bottler for Coca-Cola products. It currently sports a Zacks Rank #1. FMX has a trailing four-quarter earnings surprise of 46.3%, on average.

The Zacks Consensus Estimate for FEMSA’s current fiscal-year sales suggests growth of 11% from the year-ago reported figure. Meanwhile, the consensus mark for earnings suggests a year-over-year decline of 3.4%.

Lamb Weston, which offers frozen potato products, has a Zacks Rank #2 (Buy) at present. LW delivered an earnings surprise of 28.8% in the last reported quarter.

The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the year-ago reported numbers.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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