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Category: Stock Market and Boston Beer Company (SAM)
Date: 1 November 2020 Stock Price of Boston Beer Company: $1039.18 We take a look at the 3rd quarter earnings report of their 2020 fiscal year of craft beer company and owner of brands such as Samuel Adams and newly acquired Dogfish Head. Revenue for the 3rd quarter came in at $492.7 million and net income was recorded at $80.8 million.
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We achieved depletions growth of 36% in the third quarter. We believe that our depletions growth is attributable to our key innovations, quality and strong brands, as well as sales execution and support from our distributors. As the COVID-19 pandemic continues, our primary focus continues to be on operating our breweries and our business safely and working hard to meet customer demand.- Jim Koch, Chairman and Founder of the Company "
About Boston Beer Company (SAM)
The Boston Beer Company, Inc. (NYSE: SAM) began in 1984 brewing Samuel Adams beer and the Samuel Adams brand is currently recognized as one of the largest and most respected craft beer brands. Our portfolio of brands also includes Angry Orchard Hard Cider, Twisted Tea, Truly Hard Seltzer, Wild Leaf Hard Tea and Tura Alcoholic Kombucha as well as other craft beer brands such as Angel City Brewery, Coney Island Brewing, and Concrete Beach Brewery. On July 3, 2019, the Company completed its previously reported Dogfish Head Brewery transaction. Dogfish Head has a proud history as a craft beer pioneer with a brand that is beloved by American consumers and highly respected by the industry.
Quick facts about Boston Beer Company (SAM) which all refers to fiscal year end 2019:
Quick facts about Boston Beer Company (SAM) which all refers to fiscal year end 2019:
- Boston Beer Company is listed on the New York Stock Exchange under share code ticker: SAM
- Owns Samuel Adams
- Owns Dogfish Head
- Owns Twisted Tea
- Sales for 2019 fiscal year: $1.249 billion
- 2 128 employees as at end December 2019
- Earnings per share of Boston Beer Company in 2019 fiscal year: $9.16
- Shares in issue: 11.908 million
- Number of stockholders: 8 477
- Number of barrels sold: 5 307
- Net revenue per barrel: $235.51
Overview of Boston Beer Company (SAM) 3rd quarter 2020 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Revenues: $492.792 million (up from $378.446 million for the same quarter of the previous year)
- Revenues increased by 30.2% over the last 12 months
- Cost of goods sold: $252.207 million (up from $190.631 million for the same quarter of the previous year)
- Cost of goods increased by 32.3% over the last 12 months
- Some margin squeeze on Boston Beer Company is revenues grew at a rate a lot slower than their cost of goods sold.
- Net income: $80.787 million (up from $44.729 million for the same quarter of the previous year)
- Diluted earnings per share: $6.51 (up from $3.65 for the same quarter of the previous year)
- PE ratio of Boston Beer Company: 60.4
- Number of shares in issue: 12.333 million (up from 12.150 million for the same period of the previous year)
- Cash and cash equivalents: $157.130 million
- Cash and cash equivalents per share: $12.74
- Cash and cash equivalents makes up 1.2% of Boston Beer Company's market capital
- Cash and cash equivalents makes up 11.9% of Boston Beer Company's total assets
- Inventories: $123.831 million
- Inventories makes up 9.4% of Boston Beer Company's total assets
- Goodwill in Boston Beer Company: $112.529 million
- Goodwill per share: $9.12
- Goodwill makes up 8.6% of Boston Beer Company's total assets
- Total stockholders equity in Boston Beer Company: $918.530 million
- Stockholders equity per share in Boston Beer Company: $74.47
- Boston Beer Company is trading at 13.9 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at
- For perspective the S&P 500 has an average price to book of 3.8
Boston Beer Company (NYSE: SAM) management commentary on 3rd quarter 2020 earnings
BOSTON, Oct. 22, 2020 /PRNewswire/ -- The Boston Beer Company, Inc. (NYSE: SAM) reported third quarter 2020 net revenue of $492.8 million, an increase of $114.3 million or 30.2%, from the same period last year. Net income for the third quarter was $80.8 million, an increase of $36.0 million or 80.6% from the same period last year. Earnings per diluted share were $6.51, an increase of $2.86 per diluted share, or 78.4% from the third quarter of 2019. This increase was primarily due to increased revenue that was driven by shipment growth of 30.5%, partially offset by lower gross margins and increases in operating expenses.
The Company began seeing the impact of the COVID-19 pandemic on its business in early March. The direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the on-premise channel and higher labor and safety-related costs at the Company's breweries. In the 39-week period ended September 26, 2020, the Company recorded COVID-19 related pre-tax reductions in net revenue and increases in other costs that total $14.2 million, of which $10.0 million was recorded in the first quarter and $4.1 million was recorded in the second quarter and $0.1 million was recorded in the third quarter. The total amount consists of a $3.4 million reduction in net revenue for estimated keg returns from distributors and retailers and $10.8 million of other COVID-19 related direct costs, of which $7.4 million are recorded in cost of goods sold and $3.4 million are recorded in operating expenses. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of brewery productivity. This has shifted more volume to third-party breweries, which increased production costs and negatively impacted gross margins. The Company will continue to assess and manage this situation and will provide a further update in its fourth quarter earnings release, to the extent that the effects of the COVID-19 pandemic are then known more clearly.
The Company began seeing the impact of the COVID-19 pandemic on its business in early March. The direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the on-premise channel and higher labor and safety-related costs at the Company's breweries. In the 39-week period ended September 26, 2020, the Company recorded COVID-19 related pre-tax reductions in net revenue and increases in other costs that total $14.2 million, of which $10.0 million was recorded in the first quarter and $4.1 million was recorded in the second quarter and $0.1 million was recorded in the third quarter. The total amount consists of a $3.4 million reduction in net revenue for estimated keg returns from distributors and retailers and $10.8 million of other COVID-19 related direct costs, of which $7.4 million are recorded in cost of goods sold and $3.4 million are recorded in operating expenses. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of brewery productivity. This has shifted more volume to third-party breweries, which increased production costs and negatively impacted gross margins. The Company will continue to assess and manage this situation and will provide a further update in its fourth quarter earnings release, to the extent that the effects of the COVID-19 pandemic are then known more clearly.
Jim Koch, Chairman and Founder of the Company, commented, "We achieved depletions growth of 36% in the third quarter. We believe that our depletions growth is attributable to our key innovations, quality and strong brands, as well as sales execution and support from our distributors. As the COVID-19 pandemic continues, our primary focus continues to be on operating our breweries and our business safely and working hard to meet customer demand. I am very proud of the passion, creativity and commitment to community that our company has demonstrated during this pandemic. We remain positive about the future growth of our brands and are happy that our diversified brand portfolio continues to fuel double-digit growth for the tenth consecutive quarter. We have planned some major innovations to be introduced in 2021 for all our brands. These include Truly Iced Tea Hard Seltzer, Samuel Adams' Just the Haze, our first non-alcoholic beer, Dogfish Head Scratch-Made Canned Cocktails and Angry Orchard Hard Fruit Cider. We are confident in our ability to continue to innovate and build strong brands to help support our mission of long-term profitable growth."
Dave Burwick, the Company's President and CEO stated, "Our depletions growth in the third quarter was the result of increases in our Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in our Samuel Adams, Angry Orchard and Dogfish Head brands. The growth of the Truly brand, led by Truly Lemonade Hard Seltzer, continues to be very strong and we expect the Truly brand to continue to lead the growth of the business into 2021. In early 2021, we will launch Truly Iced Tea Hard Seltzer, Truly Extra, a higher ABV version of Truly, and other new Truly flavors and package sizes, as we continue to lead innovation in the Hard Seltzer category. We believe that Truly Iced Tea Hard Seltzer, which combines the refreshment of hard seltzer with real brewed tea and fruit flavor at only 100 calories and 1 gram of sugar, will further strengthen our position in the category. Since early in 2020, Truly has grown its velocity and its market share sequentially despite other national, regional and local hard seltzer brands entering the category. Truly is the only national hard seltzer, not introduced earlier this year, to grow its share during 2020. We will continue to invest heavily in the Truly brand and work to improve our position in the hard seltzer category as competition continues to increase. We also will continue to invest heavily in our "Live Truly" advertising campaign that showcases, variety, colors and joy to hard seltzer drinkers. Twisted Tea has benefited greatly from increased at-home consumption and continues to generate consistent double-digit volume growth, even as new entrants have been introduced and competition has increased.
Our Samuel Adams, Angry Orchard and Dogfish Head brands have been most negatively impacted by COVID-19 and the related On-Premise closures, but we are pleased that they all finished the month of September with strong growth in the measured Off-Premise channels compared to last September. For the remainder of 2020 and into 2021, we plan to build upon our success and work to drive our brands to their full potential, with a particular focus on our Truly brand. We've adjusted our expectations for 2020 full-year depletions growth and our earnings guidance to reflect our trends for the first nine months and our current view of the remainder of the year, which is primarily driven by the year-to-date performance of Truly. We are expecting all of our brands to grow in 2021 and are targeting overall volume growth rates to be between 35% and 45%. We have closely managed our operating costs through the COVID-19 pandemic and achieved our planned cost synergies from the Dogfish Head merger. In 2021, based on our current spending and volume assumptions, we are planning for the growth rate of our operating expenses to be below our top line growth rate, delivering leverage to our operating income."
Mr. Burwick continued, "We have been operating our breweries at full capacity for many months and, like our competitors, we have had out of stocks during the quarter. We expect wholesaler inventories to return to normal levels in the fourth quarter, as we recover from our summer seasonal peak. Improving our supply chain performance continues to be our top priority and we are in the process of doubling our internal and third-party brewery can packaging capacity for 2021. Our new can line at our Cincinnati Brewery began production late in the third quarter and we have recently added additional third-party brewery sleek can capacity. As reflected in our 2020 and 2021 capital spending guidance, we will continue to invest heavily to increase capacity as appropriate to meet the needs of our business and take full advantage of the fast-growing Hard Seltzer category. However, the increased usage of third-party breweries and an increasing percentage of variety packs in the Company's overall product mix come at a higher incremental cost. As a result, our gross margins and gross margin expectations will be negatively impacted until the volume growth stabilizes. We began a multi-year supply chain transformation project in 2020 to automate and change internal processes to increase efficiency and reduce costs. The timing of the benefits of this program will depend on the timing and amount of our future volume growth. We will continue to prioritize volume delivery over margin optimization in this high-growth environment. While we are in a very competitive business, we are optimistic for continued growth of our current brand portfolio and innovations and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see."
Depletion estimates
Year-to-date depletions through the 42-week period ended October 17, 2020 are estimated by the Company to have increased approximately 39% from the comparable period in 2019. Excluding the Dogfish Head impact, depletions increased 37%.
2020 Outlook
The Company currently projects full year 2020 earnings per diluted share to be between $14.00 and $15.00. This projection excludes the impact of ASU 2016-09. The Company's actual 2020 earnings per share could vary significantly from the current projection. Underlying the Company's current 2020 projection are the following full-year estimates and targets:
2021 Outlook
The Company is completing its 2021 planning process and will provide further detailed guidance when the Company presents its full-year 2020 results. The Company is currently using the following preliminary assumptions and targets for its 2021 fiscal year:
Dave Burwick, the Company's President and CEO stated, "Our depletions growth in the third quarter was the result of increases in our Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in our Samuel Adams, Angry Orchard and Dogfish Head brands. The growth of the Truly brand, led by Truly Lemonade Hard Seltzer, continues to be very strong and we expect the Truly brand to continue to lead the growth of the business into 2021. In early 2021, we will launch Truly Iced Tea Hard Seltzer, Truly Extra, a higher ABV version of Truly, and other new Truly flavors and package sizes, as we continue to lead innovation in the Hard Seltzer category. We believe that Truly Iced Tea Hard Seltzer, which combines the refreshment of hard seltzer with real brewed tea and fruit flavor at only 100 calories and 1 gram of sugar, will further strengthen our position in the category. Since early in 2020, Truly has grown its velocity and its market share sequentially despite other national, regional and local hard seltzer brands entering the category. Truly is the only national hard seltzer, not introduced earlier this year, to grow its share during 2020. We will continue to invest heavily in the Truly brand and work to improve our position in the hard seltzer category as competition continues to increase. We also will continue to invest heavily in our "Live Truly" advertising campaign that showcases, variety, colors and joy to hard seltzer drinkers. Twisted Tea has benefited greatly from increased at-home consumption and continues to generate consistent double-digit volume growth, even as new entrants have been introduced and competition has increased.
Our Samuel Adams, Angry Orchard and Dogfish Head brands have been most negatively impacted by COVID-19 and the related On-Premise closures, but we are pleased that they all finished the month of September with strong growth in the measured Off-Premise channels compared to last September. For the remainder of 2020 and into 2021, we plan to build upon our success and work to drive our brands to their full potential, with a particular focus on our Truly brand. We've adjusted our expectations for 2020 full-year depletions growth and our earnings guidance to reflect our trends for the first nine months and our current view of the remainder of the year, which is primarily driven by the year-to-date performance of Truly. We are expecting all of our brands to grow in 2021 and are targeting overall volume growth rates to be between 35% and 45%. We have closely managed our operating costs through the COVID-19 pandemic and achieved our planned cost synergies from the Dogfish Head merger. In 2021, based on our current spending and volume assumptions, we are planning for the growth rate of our operating expenses to be below our top line growth rate, delivering leverage to our operating income."
Mr. Burwick continued, "We have been operating our breweries at full capacity for many months and, like our competitors, we have had out of stocks during the quarter. We expect wholesaler inventories to return to normal levels in the fourth quarter, as we recover from our summer seasonal peak. Improving our supply chain performance continues to be our top priority and we are in the process of doubling our internal and third-party brewery can packaging capacity for 2021. Our new can line at our Cincinnati Brewery began production late in the third quarter and we have recently added additional third-party brewery sleek can capacity. As reflected in our 2020 and 2021 capital spending guidance, we will continue to invest heavily to increase capacity as appropriate to meet the needs of our business and take full advantage of the fast-growing Hard Seltzer category. However, the increased usage of third-party breweries and an increasing percentage of variety packs in the Company's overall product mix come at a higher incremental cost. As a result, our gross margins and gross margin expectations will be negatively impacted until the volume growth stabilizes. We began a multi-year supply chain transformation project in 2020 to automate and change internal processes to increase efficiency and reduce costs. The timing of the benefits of this program will depend on the timing and amount of our future volume growth. We will continue to prioritize volume delivery over margin optimization in this high-growth environment. While we are in a very competitive business, we are optimistic for continued growth of our current brand portfolio and innovations and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see."
Depletion estimates
Year-to-date depletions through the 42-week period ended October 17, 2020 are estimated by the Company to have increased approximately 39% from the comparable period in 2019. Excluding the Dogfish Head impact, depletions increased 37%.
2020 Outlook
The Company currently projects full year 2020 earnings per diluted share to be between $14.00 and $15.00. This projection excludes the impact of ASU 2016-09. The Company's actual 2020 earnings per share could vary significantly from the current projection. Underlying the Company's current 2020 projection are the following full-year estimates and targets:
- Depletions and shipments increase of between 37% and 42% of which between 1% and 2% of this growth is due to the addition of the Dogfish Head brands.
- National price increases of between 1% and 2%.
- Gross margin of between 46% and 47%.
- Increased investments in advertising, promotional and selling expenses of between $55 million and $65 million, a change from the previously communicated estimate of between $70 million and $80 million, primarily due to lower selling expenses. This does not include any changes in freight costs for the shipment of products to the Company's distributors.
- Non-GAAP effective tax rate of approximately 26%, excluding the impact of ASU 2016-09.
- Estimated capital spending of between $160 million and $190 million, a change from the previously communicated estimate of between $180 million and $200 million, most of which relates to continued investments in the Company's breweries.
2021 Outlook
The Company is completing its 2021 planning process and will provide further detailed guidance when the Company presents its full-year 2020 results. The Company is currently using the following preliminary assumptions and targets for its 2021 fiscal year:
- Depletions and shipments percentage increase between 35% and 45%
- National price increases of between 1% and 2%.
- Gross margin of between 46% and 48%.
- Increased investments in advertising, promotional and selling expenses of between $130 million and $150 million. This does not include any changes in freight costs for the shipment of products to the Company's distributors.
- Non-GAAP effective tax rate of approximately 26%, excluding the impact of ASU 2016-09.
- Estimated capital spending of between $300 million and $400 million, which could be significantly higher, if deemed necessary to meet future growth.
Boston Beer Company (NYSE: SAM) stock price history
The image below obtained from Google, shows the stock price history of Boston Beer Company over the last 5 years. And its been a very good time for Boston Beer Company. 5 years ago the stock of Boston Beer Company was trading at around $224 a stock and its currently trading at $659.23 a stock. That's a decent return of 194% provided to Boston Beer Company stockholders over the last 5 years.
The stock of Boston Beer Company is trading at a lot closer to its 52 week high of $1092.80 than it is to its 52 week low of $290.02 a stock, which to us is a clear indication that the short term sentiment and momentum of Boston Beer Company stock is positive at this point in time.
The stock of Boston Beer Company is trading at a lot closer to its 52 week high of $1092.80 than it is to its 52 week low of $290.02 a stock, which to us is a clear indication that the short term sentiment and momentum of Boston Beer Company stock is positive at this point in time.
Boston Beer Company (SAM) vs Molson Coors (TAP) vs Constellation Brands (STZ)
The image below shows the stock price performance of Boston Beer Company (SAM), Molson Coors (TAP) and Constellation Brands (STZ) over the last 5 years. While all three firms are active in the brewing and distillery space their stock price performance is vastly different even though they are all operating in the same sector. Below the stock price returns of the three brewers over the last 5 years.
Boston Beer Company's stock has easily outperformed that of its peers
- Boston Beer Company (SAM): 375.6%
- Constellation Brands (STZ): 8.1%
- Molson Coors (TAP): -62.2%
Boston Beer Company's stock has easily outperformed that of its peers
Recent coverage of Boston Beer Company (SAM)
The extract below discusses the latest regarding Boston Beer Company (SAM) as obtained from Fool.com
Boston Beer (NYSE:SAM) just crossed the $1,000 stock price threshold for the first time ever as the brewer and beverage maker has gone on a year-long tear.Despite declining demand from on-premise sales as pandemic-induced capacity restrictions on bars and restaurants limit the channel's ability to meaningfully contribute to sales and profits, at-home consumption continues to explode.
With the stock nearly 300% higher than the low-point it hit in March -- and almost 200% above where it started 2020 -- let's see if investors should consider buying the owner of Samuel Adams beer, Truly hard seltzer, and Angry Orchard hard cider.
Effervescent growth
Boston Beer has come a long way from being the premier craft brewer in the country, but today it produces far more alcoholic beverages that aren't beer than are. The growth of hard seltzer as the beverage of choice for many of today's drinkers is what helped reverse the brewer's years-long decline as its Samuel Adams beer fell out of favor. Truly hard seltzer remains the second-biggest brand on the market with about a 25% share, behind Mark Anthony Brands' White Claw, but the brewer says Truly is the only national hard seltzer that expanded its market share this year.
Read the full article here
Boston Beer (NYSE:SAM) just crossed the $1,000 stock price threshold for the first time ever as the brewer and beverage maker has gone on a year-long tear.Despite declining demand from on-premise sales as pandemic-induced capacity restrictions on bars and restaurants limit the channel's ability to meaningfully contribute to sales and profits, at-home consumption continues to explode.
With the stock nearly 300% higher than the low-point it hit in March -- and almost 200% above where it started 2020 -- let's see if investors should consider buying the owner of Samuel Adams beer, Truly hard seltzer, and Angry Orchard hard cider.
Effervescent growth
Boston Beer has come a long way from being the premier craft brewer in the country, but today it produces far more alcoholic beverages that aren't beer than are. The growth of hard seltzer as the beverage of choice for many of today's drinkers is what helped reverse the brewer's years-long decline as its Samuel Adams beer fell out of favor. Truly hard seltzer remains the second-biggest brand on the market with about a 25% share, behind Mark Anthony Brands' White Claw, but the brewer says Truly is the only national hard seltzer that expanded its market share this year.
Read the full article here
Boston Beer Company (NYSE: SAM) stock valuation
So what do we value Boston Beer Company stock at after the release of their 3rd quarter 2020 earnings? Based on Boston Beer Company earnings report our valuation models provides a target (full value) price for Boston Beer Company at $471.70 a stock (up strongly from our 2nd quarter 2020 earnings review of Boston Beer Company) . We therefore believe that the stock of Boston Beer Company is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $471.70. Therefore we believe a good entry point into Boston Beer Company stock is at $425.50 or below. We expect the stock of Boston Beer Company to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is significantly overvalued at this point in time.
We therefore rate Boston Beer Company stock as a sell
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $471.70. Therefore we believe a good entry point into Boston Beer Company stock is at $425.50 or below. We expect the stock of Boston Beer Company to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is significantly overvalued at this point in time.
We therefore rate Boston Beer Company stock as a sell
Next earnings release of Boston Beer Company (SAM)
It is expected that Boston Beer Company will publish their 4th quarter 2020 earnings report in late January 2021