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Category: Stock Market and Boston Beer Company
Date: 23 February 2020 Stock Price: $396.94 We take a look at the 4th quarter earnings report of their 2019 fiscal year of craft beer company and owner of brands such as Samuel Adams and newly acquired Dogfish Head.
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About Boston Beer Company
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.
Overview of Boston Beer Company 4th quarter 2019 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Revenues: $320.215 million (up from $239.238 million for the same quarter of the previous year)
- Revenues increased by 33.8% over the last 12 months
- Cost of goods sold: $158.511 million (up from $108.273 million for the same quarter of the previous year)
- Cost of goods increased by 46.4% 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: $13.762 million (down from $21.811 million for the same quarter of the previous year)
- Diluted earnings per share: $1.12 (down from $1.86 for the same quarter of the previous year)
- PE ratio of Boston Beer Company: 37.1
- Number of shares in issue: 12.170 million (up from 11.681 million for the same period of the previous year)
- Cash and cash equivalents: $36.670 million
- Cash and cash equivalents per share: $3.01
- Cash and cash equivalents makes up 0.75% of Boston Beer Company's market capital
- Cash and cash equivalents makes up 3.48% of Boston Beer Company's total assets
- Inventories: $106.038 million
- Inventories makes up 10.06% of Boston Beer Company's total assets
- Goodwill in Boston Beer Company: $112.529 million
- Goodwill per share: $9.24
- Goodwill makes up 10.67% of Boston Beer Company's total assets
- Total stockholders equity in Boston Beer Company: $735.636 million
- Stockholders equity per share in Boston Beer Company: $60.44
- Boston Beer Company is trading at 6.57 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
Boston Beer Company (NYSE: SAM) management commentary on 4th quarter 2019 earnings
BOSTON, Feb. 19, 2020 /PRNewswire/ -- The Boston Beer Company, Inc. (NYSE: SAM) reported fourth quarter 2019 net revenue of $301.3 million, an increase of $76.1 million or 33.8% from the fourth quarter of 2018, mainly due to an increase in shipments of 31.7%. Net income for the fourth quarter was $13.8 million, or $1.12 per diluted share, a decrease of $8.0 million or $0.74 per diluted share from the fourth quarter of 2018. This decrease was primarily due to increases in advertising, promotional and selling expenses and lower gross margins that were only partially offset by the increased revenue.
Jim Koch, Chairman and Founder of the Company, commented, "We are happy to report 25% fourth quarter depletions growth, of which 19% is from Boston Beer legacy brands and 6% is from the addition of Dogfish Head brands. We are making good progress on the Dogfish Head integration and have merged our sales forces and our business processes and systems. We have learned a lot from each other, as we have merged our teams, culture, values and innovation capability. Collectively, we are thankful to our outstanding coworkers for their focus and diligence and our distributors, retailers and drinkers, all of whom helped the Company to achieve double digit volume growth for the seventh consecutive quarter. We believe that our depletions growth is attributable to our key innovations, the quality of our products and our strong brands, as well as sales execution and support from our distributors. We see significant distribution and volume growth opportunities in 2020 for our Dogfish Head brands as our Truly, Twisted Tea and Dogfish Head brands remain our top priorities for 2020. At the same time, we are working hard to further develop our brand support and messaging for our Samuel Adams brand to position it for long-term sustainable growth, in the face of a difficult competitive environment. We are excited about the response to the reformulation of our Samuel Adams Cold Snap seasonal, our new Samuel Adams 'Toast Someone' campaign, and the Samuel Adams Tap Room that opened in downtown Boston in January. We are confident in our ability to innovate and build strong brands that complement our current portfolio and help support our mission of long-term profitable growth."
Jim Koch, Chairman and Founder of the Company, commented, "We are happy to report 25% fourth quarter depletions growth, of which 19% is from Boston Beer legacy brands and 6% is from the addition of Dogfish Head brands. We are making good progress on the Dogfish Head integration and have merged our sales forces and our business processes and systems. We have learned a lot from each other, as we have merged our teams, culture, values and innovation capability. Collectively, we are thankful to our outstanding coworkers for their focus and diligence and our distributors, retailers and drinkers, all of whom helped the Company to achieve double digit volume growth for the seventh consecutive quarter. We believe that our depletions growth is attributable to our key innovations, the quality of our products and our strong brands, as well as sales execution and support from our distributors. We see significant distribution and volume growth opportunities in 2020 for our Dogfish Head brands as our Truly, Twisted Tea and Dogfish Head brands remain our top priorities for 2020. At the same time, we are working hard to further develop our brand support and messaging for our Samuel Adams brand to position it for long-term sustainable growth, in the face of a difficult competitive environment. We are excited about the response to the reformulation of our Samuel Adams Cold Snap seasonal, our new Samuel Adams 'Toast Someone' campaign, and the Samuel Adams Tap Room that opened in downtown Boston in January. We are confident in our ability to innovate and build strong brands that complement our current portfolio and help support our mission of long-term profitable growth."
Dave Burwick, the Company's President and CEO, stated, "Our depletions growth in the fourth quarter was the result of increases in our Truly Hard Seltzer and Twisted Tea brands and the addition of the Dogfish Head brands, partly offset by decreases in our Samuel Adams and Angry Orchard brands. Truly continues to generate triple-digit volume growth and we are continuing to expand package and draft distribution across all channels. During the fourth quarter, we launched new formulations for all of our Truly flavors, which have been very well received by drinkers. Before we rolled out the new flavors, we conducted consumer tests to ensure that we had the best-tasting hard seltzer on the market. In fact, since the reformulations hit the market in November, both our volume and velocity trends have increased significantly. We continue to launch additional flavors, and recently launched Truly Hard Seltzer Lemonade. To date, the response from our distributors, retailers and drinkers on the new formulations and Truly Hard Seltzer Lemonade has been very positive, but it's too early to draw conclusions on the long-term impact. We believe the new, improved formulations and the Truly Lemonade launch, combined with our previously announced NHL partnership and our significantly increased advertising spend, will help further bolster our position as a leader in hard seltzer as more competitors enter the category. In 2020, we will continue to build a compelling and differentiated Truly brand and evolve our brand communications campaign accordingly. Our Twisted Tea brand continues to generate consistent double-digit volume growth, even as new entrants have been introduced and competition has increased. Angry Orchard's volume has declined against the 2018 national roll out of Angry Orchard Rosé, but Angry Orchard continues to maintain more than a 55% market share in hard cider. The cider category continues to be challenged and we are working to return Angry Orchard to growth through continued packaging, innovation, promotion and brand communication initiatives."
Mr. Burwick went on to say, "During the fourth quarter, as we increased our brand spend, we also made investments in our supply chain to ensure that we are prepared for increased competitive activity in the hard seltzer category. We have invested to increase our can and automated variety pack capacity, but these capacity increases keep on getting eclipsed by our depletions growth, resulting in higher than expected usage of third-party breweries. We will continue to take advantage of the fast-growing hard seltzer category and deliver against the increased demand through this combination of internal capacity increases and higher usage of third-party breweries. Meeting these higher volumes while installing new capacity has a negative impact on our gross margins. To address this, we've started a comprehensive program to transform our supply chain with the goal of making our integrated supply chain more efficient, reduce costs, increase our flexibility to better react to mix changes, and allow us to scale up more efficiently. We expect this program to run for two to three years and begin showing margin improvement by the first half of 2021, but our gross margins and gross margin expectations will continue to be impacted negatively until the volume growth stabilizes. For 2020, we are targeting 15% to 25% volume growth and a significant increase in our operating income. We expect first quarter shipments growth to be significantly higher than depletions as we continue to manage our supply chain and capacity to ensure that our distributor inventory levels adequately support drinker demand for our brands during the peak summer months. Our priorities continue to be to drive Truly, Twisted Tea and Dogfish Head brand growth and work to return Samuel Adams and Angry Orchard toward long-term sustainable growth. We also will continue to focus on cost savings and efficiency projects to fund the investments required to grow our brands, to build our organization's ability to deliver against our goals, and to improve our profitability. 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."
2020 Outlook
The Company currently projects full year 2020 Non-GAAP earnings per diluted share of between $10.70 and $11.70. This Non-GAAP 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:
Mr. Burwick went on to say, "During the fourth quarter, as we increased our brand spend, we also made investments in our supply chain to ensure that we are prepared for increased competitive activity in the hard seltzer category. We have invested to increase our can and automated variety pack capacity, but these capacity increases keep on getting eclipsed by our depletions growth, resulting in higher than expected usage of third-party breweries. We will continue to take advantage of the fast-growing hard seltzer category and deliver against the increased demand through this combination of internal capacity increases and higher usage of third-party breweries. Meeting these higher volumes while installing new capacity has a negative impact on our gross margins. To address this, we've started a comprehensive program to transform our supply chain with the goal of making our integrated supply chain more efficient, reduce costs, increase our flexibility to better react to mix changes, and allow us to scale up more efficiently. We expect this program to run for two to three years and begin showing margin improvement by the first half of 2021, but our gross margins and gross margin expectations will continue to be impacted negatively until the volume growth stabilizes. For 2020, we are targeting 15% to 25% volume growth and a significant increase in our operating income. We expect first quarter shipments growth to be significantly higher than depletions as we continue to manage our supply chain and capacity to ensure that our distributor inventory levels adequately support drinker demand for our brands during the peak summer months. Our priorities continue to be to drive Truly, Twisted Tea and Dogfish Head brand growth and work to return Samuel Adams and Angry Orchard toward long-term sustainable growth. We also will continue to focus on cost savings and efficiency projects to fund the investments required to grow our brands, to build our organization's ability to deliver against our goals, and to improve our profitability. 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."
2020 Outlook
The Company currently projects full year 2020 Non-GAAP earnings per diluted share of between $10.70 and $11.70. This Non-GAAP 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 percentage increase of between 15% and 25%.
- National price increases of between 1% and 3%.
- Gross margin of between 49% and 51%.
- Increased investment in advertising, promotional and selling expenses of between $80 million and $90 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 27%, excluding the impact of ASU 2016-09.
- Estimated capital spending of between $135 million and $155 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 volatile but pretty good time for Boston Beer Company. 5 years ago the stock of Boston Beer Company was trading at around $267.60 a stock and its currently trading at $396.64 a stock. That's a decent return of 48.2% 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 $444.64 than it is to its 52 week low of $258.34 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 $444.64 than it is to its 52 week low of $258.34 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,
Recent coverage of Boston Beer Company
The extract below discusses the latest regarding Boston Beer Company (NYSE: CTB) as obtained from Nasdaq.com
Boston Beer Company co-founder Jim Koch defended its heavy investment in hard seltzer Thursday as shares fell after weak guidance and a per-share earnings miss. “Sometimes growth, it’s not cheap, particularly in something capital-intensive like beer,” Koch said on “Closing Bell.” Hard seltzer, in particular, demands significant investment because “it’s the biggest thing that’s come into the beer business since light beer,” Koch said.
Shares of Boston Beer Company slid 7.6% to $396 Thursday following its after-the-bell earnings report a day earlier. It posted earnings of $1.12 per share for the fourth quarter while analysts had forecast earnings of $1.47 per share. It also reported full-year EPS guidance of $10.70 to $11.70. Wall Street consensus had been $11.72. Boston Beer CEO David Burwick said on the earnings call that margins will continue to suffer as it increases capacity to meet demand around hard seltzer.
“We expect this program to run for two to three years and begin showing margin improvement by the first half of 2021,” he said, according to a transcript from The Motley Fool. The Samuel Adams brewer said it saw triple-digit growth around its hard seltzer brand, Truly, which helped deliver quarterly revenue of $301.3 million. It represents a 33.8% increase compared with the prior year. Despite Thursday’s slide, Boston Beer’s stock remains up 47% in the past 12 months as the hard seltzer category exploded. “Let’s not get distracted by what happens today or tomorrow,” Koch said in defense of the company’s strategy. “Let’s make sure we’re building for the future.”
Read the full article here
Boston Beer Company co-founder Jim Koch defended its heavy investment in hard seltzer Thursday as shares fell after weak guidance and a per-share earnings miss. “Sometimes growth, it’s not cheap, particularly in something capital-intensive like beer,” Koch said on “Closing Bell.” Hard seltzer, in particular, demands significant investment because “it’s the biggest thing that’s come into the beer business since light beer,” Koch said.
Shares of Boston Beer Company slid 7.6% to $396 Thursday following its after-the-bell earnings report a day earlier. It posted earnings of $1.12 per share for the fourth quarter while analysts had forecast earnings of $1.47 per share. It also reported full-year EPS guidance of $10.70 to $11.70. Wall Street consensus had been $11.72. Boston Beer CEO David Burwick said on the earnings call that margins will continue to suffer as it increases capacity to meet demand around hard seltzer.
“We expect this program to run for two to three years and begin showing margin improvement by the first half of 2021,” he said, according to a transcript from The Motley Fool. The Samuel Adams brewer said it saw triple-digit growth around its hard seltzer brand, Truly, which helped deliver quarterly revenue of $301.3 million. It represents a 33.8% increase compared with the prior year. Despite Thursday’s slide, Boston Beer’s stock remains up 47% in the past 12 months as the hard seltzer category exploded. “Let’s not get distracted by what happens today or tomorrow,” Koch said in defense of the company’s strategy. “Let’s make sure we’re building for the future.”
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 4th quarter 2019 earnings and the fiscal guidance provided for the full fiscal 2019? Based on Boston Beer Company earnings report and fiscal guidance provided our valuation models provides a target (full value) price for Boston Beer Company at $341.10 a stock . 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 $34.10. Therefore we believe a good entry point into Boston Beer Company stock is at $307 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 $34.10. Therefore we believe a good entry point into Boston Beer Company stock is at $307 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
It is expected that Boston Beer Company will publish their 1st quarter 2020 earnings report in late May 2020