Much like the brew it purveys, shares of
Boston Beer, the country's second-largest craft brewer and maker of Sam Adams craft beer, reported Thursday evening that it recorded $244.8 million in second quarter revenue. This figure marks a 4% decline on a year-over-year basis but managed to come in above the $243.5 million analyst consensus. Net income for the quarter came in at $26.6 million, or $2.06 per share, two figures that are also declined on a year-over-year basis, but not as much as Wall Street expected. The Street's estimate had called for $1.97 in earnings per share.
Boston Beer has found itself struggling in recent quarters due to the twin impact of increased competition from smaller craft brewers and a slowdown in consumer demand for hard cider. A recent RBC analysis showed that there has been a significant slowdown in hard cider growth over the last two years to the point that the category is now experiencing declines. This, of course has negative implications for Boston Beer's Angry Orchard drinks, though working in the brand's favor is that it maintained and did not lose its share of the market during the second quarter.
"Our total company depletion trends declined in the second quarter at a rate consistent with the first quarter trends, even as the better beer and craft categories appear healthy," Boston Beer founder and chairman Jim Koch said in a statement Thursday evening. "Our Samuel Adams brand lost share of craft due to the increased competition and continued growth of drinker interest in trying new styles. While the launches of our new beers, including the Samuel Adams Nitro Project and Samuel Adams Rebel Grapefruit IPA, have been successful and well-received, they have not offset declines in Samuel Adams Boston Lager and our Samuel Adams seasonal beers."
Martin Roper, the company's president and CEO, added that Boston Beer is evaluating "all opportunities to better fit the current volume environment," many of which will take the form of cost savings and efficiency improvements. While some of these initiatives will benefit Boston Beer's second half of fiscal 2016, Roper said that most will start delivering next year. "We remain prepared to forsake short term earnings as we strive to return to long term profitable growth," he said.
The company is projecting $6.40 to $7.00 in full-year earnings per share, and a gross margin between 50% and 52%.
Wall Street analysts appeared encouraged by Boston Beer's results and its commentary.
"We believe the worst is likely behind Sam Adams due to strong end-market growth, planned marketing and brand investment, and easier comparisons going forward,"
Fleck also said that he's encouraged by the company's cost savings initiatives, which he estimates could drive a 3% improvement in gross margin.
It's this optimism that seems to be driving Boston Beer's stock performance in Friday's trading session -- both from a long and short perspective. There's a 13% short interest in Boston Beer, and an 11.7 short ratio (i.e, the number of days it would take to cover that short bet), so it's likely that the company's better-than-expected earnings and solid outlook have inspired many a trader to cover his or her shorts.
Worth noting is that it's not just Boston Beer's margins and margin potential that are attracting bullish bets from investors; there are a few other financial metrics that Boston Beer has going for it. The brewer has virtually no debt on its balance sheet, and with a price-to-earnings ratio of 29, it's a cheaper investment than its competitors
