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Boston Beer's (SAM) Q4 Earnings to Gain From Growth Plan

We expect The Boston Beer Company, Inc. SAM to beat expectations when it reports fourth-quarter 2017 results on Feb 21. In the preceding quarter, this producer and seller of alcohol beverages delivered a positive earnings surprise of 51.1%.

A look at the company’s earnings trend shows that Boston Beer has delivered a positive earnings surprise in the trailing four quarters, with an average beat of 63.4%. Unsurprisingly, investors are keeping their fingers crossed and hoping that Boston Beer surpasses earnings estimate.

Which Way are Estimates Treading?

In order to get a clear picture of what analysts are thinking about the company right before earnings release, let’s have a look at the earnings estimate revisions. The Zacks Consensus Estimate of 94 cents per share for the fourth quarter has remained stable over the last 30 days. However, the estimate reflects a decline of about 46.3% from $1.75 per share earned in the year-ago quarter.

 

 

Analysts polled by Zacks expect fourth-quarter revenues to be $208.2 million, down 5.1% year over year.

Factors at Play

Boston Beer is banking on its three-point growth-plan focused on the revival of Samuel Adams and Angry Orchard brands, cost-saving initiatives and long-term innovation to lift performance. The company's focus on pricing, packaging and product innovation, along with brand development, are also likely to boost its operational performance and market position.

Moreover, the company’s brand-building efforts and initiatives to add new products remain key revenue drivers. Boston Beer strongly believes in reinvesting its profits toward capital expenditures than distributing the same to shareholders. The company has always been seeking strategic opportunities to expand its business through inorganic means, which, we believe, will certainly help it capture considerable market share from rivals.

Given the sturdy results in the preceding quarter, the company raised the lower-end of its previously stated earnings guidance range for fourth-quarter 2017. Boston Beer now anticipates its adjusted earnings per share in the band of $5.60 to $6.20, compared with $5.00 to $6.20 projected earlier.

These factors led the company’s shares to surge 13.7% in the last three months, outperforming the industry’s growth of 0.8%.

 


 

However, soft depletion trends have been a cause of worry for Boston Beer for quite some time now. This softness in depletion volumes mainly stems from the weakness in Samuel Adams and Angry Orchard brands as well as the soft craft beer and cider categories. Additionally, persistent challenges related to a competitive retail backdrop can’t be ignored. Per the company, depletion trends are likely to be soft throughout 2017.

What Does the Zacks Model Suggest?

Our proven model shows that Boston Beer is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Earnings ESP of +29.18% and the company’s Zacks Rank #1 make us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Ross Stores Inc. ROST has an Earnings ESP of +1.37% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Macy’s, Inc. M has an Earnings ESP of +0.92% and a Zacks Rank #2.

TJX Companies Inc. TJX has an Earnings ESP of +2.12% and a Zacks Rank #2.

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Boston Beer Company, Inc. (The) (SAM): Free Stock Analysis Report
 
Ross Stores, Inc. (ROST): Free Stock Analysis Report
 
TJX Companies, Inc. (The) (TJX): Free Stock Analysis Report
 
Macy's Inc (M): Free Stock Analysis Report
 
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