Here's Why Boston Beer (SAM) Possesses a Robust Upside Story

Zacks Equity Research
·4-min read

The Boston Beer Co. Inc. SAM displays a remarkable upside story despite the looming effects of the coronavirus pandemic. Strength in depletions and shipments have been keys to the company’s growth story, although keg returns due to on-premise closures have been partly hurting the top line amid the pandemic. Further, its three-point growth plan focused on the revival of its Samuel Adams and Angry Orchard brands, cost-saving initiatives, and innovation position it for a strong upside in the long term.

Notably, the Zacks Rank #1 (Strong Buy) company has a market capitalization of $9.7 billion. In the past three months, it has gained 64.6% compared with the industry’s growth of 14.3%. Moreover, it has comfortably outpaced the Consumer Staples and the Zacks S&P 500 composite’s growth of 12.3% and 18.8%, respectively.

Why Boston Beer Should Retain the Momentum

Boston Beer is expected to continue its trend of delivering robust shipments and depletions growth, thanks to the increasing popularity of its Truly Hard Seltzer and Twisted Tea as well as the Dogfish Head brands.

In the second quarter, the company witnessed accelerated depletions growth for the Truly, Twisted Tea and Dogfish Head brands. Growth at Truly was led by the Truly Hard Lemonade, which is witnessing solid trends, with the momentum likely to continue. It expects to continue investing heavily in the Truly brand to enhance the brand’s position in the hard seltzer category as competition continues to increase. Moreover, it is optimistic about the new Truly advertising campaign that showcases colors, variety and joy to hard seltzer drinkers through four different ads. Moreover, the Twisted Tea brand continues to generate double-digit volume growth rates that are well above 2019 trends.

Management foresees increased brand investments in the second half of 2020 as compared to the first half, and expects accelerated distribution and volume growth for the Truly, Twisted Tea and Dogfish Head brands.

Backed by depletions and shipment growth as well as a solid performance in Truly and Twisted Tea brands, Boston Beer issued 2020 guidance. Moreover, it is on track to reopen its store locations, with an increased focus on outdoor service and takeout. For 2020, management envisions earnings of $11.70-$12.70 per share. Also, depletions and shipments are likely to grow 27% and 35%, respectively, wherein the addition of the Dogfish Head brand is expected to contribute 1-2%.

Notably, the Zacks Consensus Estimate for 2020 and 2021 earnings are pegged at $12.45 and $17.07, indicating an improvement of 26.7% and 25.6%, respectively, in the past 30 days.

Additionally, Boston Beer remains on track with the three-point growth. Through the plan, it expects to revive the Samuel Adams and Angry Orchard brands via packaging, innovation, promotion and brand communication initiatives. Further, it remains keen on retaining Twisted Tea’s momentum, while ensuring Truly Spiked & Sparkling's leadership position in the hard sparkling-water category. Secondly, the company is focused on accelerated cost savings and efficiency projects, with savings directed for further brand development. It is also focused on long-term innovation and maximizing shareholder value.

We believe that these solid fundamentals are likely to keep the company’s existing momentum in the days ahead.

Other Stocks to Consider

Monster Beverage Corporation MNST has a long-term earnings growth rate of 12% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Beverage Corp. FIZZ also flaunts a Zacks Rank #1 at present. It delivered an earnings surprise of 22.9%, on average, in the trailing four quarters.

AnheuserBusch InBev SANV BUD delivered an earnings surprise of 48.4% in the last reported quarter. The company presently carries a Zacks Rank #2 (Buy).

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Click to get this free report AnheuserBusch InBev SANV (BUD) : Free Stock Analysis Report Monster Beverage Corporation (MNST) : Free Stock Analysis Report National Beverage Corp. (FIZZ) : Free Stock Analysis Report The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report To read this article on click here.