Sam Adams Rockets Higher on Boosted Outlook
Shares of Boston Beer Company (NYSE: SAM) gapped up in early morning trading on Thursday, following the company's move to boost its guidance Wednesday night.
Boston Beer Company is known for its flagship beer brand, Sam Adams. Unlike traditional American beers like Budweiser or Miller, Sam Adams offers a variety of different flavors more akin to local, craft breweries.
(In addition to its Sam Adams line, Boston Beer also makes alcoholic beverages under the Twist Tea, Angry Orchard, and HardCore Cider labels.)
Last time the company reported earnings, its third quarter EPS came in at $1.53 -- more than the $1.34 that was anticipated. At the time, the company guided full year earnings between $3.80-4.60.
On Wednesday, Sam Adams increased that range significantly, moving it up between $4.30-4.60.
Despite the guidance boost, analysts at UBS still believe that the stock deserves a Sell rating. Even with the earnings growth, UBS believes the stock is trading with too great of a multiple. Still, the analysts rose their price target on the stock to $111 from $99.
Boston Beer is currently trading with a forward PE near 28. Compare this figure to Molson Coors Brewing Company (NYSE: TAP) and Anheuser-Busch InBev NV (NYSE: BUD), which trade at forward PEs of only 11 and 17, respectively.
At the moment, shares of both companies are off of their highs. Most recently, Anheuser-Busch gapped down Wednesday, but this followed a run-up on Tuesday.
Boston Beer might be expected to pull back from this run up, but traders should be cautious. The stock is heavily shorted with a short float around 34 percent. Consequently, shares might be susceptible to powerful short-covering rallies that could send the stock sharply higher.
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