Market Overview

Boston Beer Earnings Preview: Still Flat

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Boston Beer (NYSE: SAM) is scheduled to report its third-quarter 2011 results Tuesday, November 1, after the closing bell. The largest craft brewer in the U.S. has seen its market share increase even as overall beer consumption has fallen off. But earnings were disappointing in the past couple of quarters.

Analysts are looking for the company to report earnings of $1.10 per share, which is about the same as in the second quarter, as well as in the third quarter of last year. The analysts' forecast also calls for the company to post revenues of $131.9 million, which would be an increase of 6.0% from a year ago.

Boston Beer fell short of consensus EPS estimates in three of the past five quarters, but it looks like analysts may have lowered expectations this time around; the EPS estimate was $1.18 some 90 days ago. Looking ahead to the current quarter, analysts so far are looking for per-share earnings to be flat year-over-year with revenues that are 8.6% higher.

The Company

Boston Beer Company produces and sells about 20 beers under the Samuel Adams or the Sam Adams brand names. The Boston-based company also produces other malt beverages and hard cider products. Its offerings can be found primarily in North America, Europe, Israel and the Pacific Rim. The company was founded in 1984 and now has a market cap of $1.2 billion.

During the three months that ended in September, the company has been restructuring its distribution to a more just-in-time system; Boston Beer says it expects 50% of its distributors to be on line by the end of the year. And the board extended the company's share buyback initiative to $250 million.

Performance

The company has a long-term earnings per share growth forecast of 22.7% and a return of equity of 33.6%. While its P/E ratio is higher than the industry average, so is its operating margin. The PEG ratio is 1.1. The company reports no long-term debt. But four of seven analysts rate the stock a Hold, and their mean price target is hardly any higher than the current share price.

That may be because over the past few weeks, the share price has jumped about 26% from a recent 52-week low, recovering from a sell-off in August and September. The stock is above both the 50-day and 200-day moving averages. In the past six months, the stock has outperformed both rival craft brewer Craft Brewer's Alliance (NASDAQ: HOOK) and mega brewer Anheuser-Busch InBev (NYSE: BUD), but its performance has been in line with the broader markets.

Action Items:

Bullish: Traders interested in exchange traded funds might want to consider the following trades:

  • PowerShares Dynamic Food & Beverage Portfolio (NYSE: PBJ) is up almost 13% in the past year.
  • First Trust Consumer Staples AlphaDEX Fund (NYSE: FXG) is up more than 19% in the past year.

Bearish: Traders who prefer to stick with the bigger brewers might want to consider these positions:

  • Anheuser-Busch InBev (NYSE: BUD) is up more than 5% in the past month.
  • Molson Coors Brewing (NYSE: TAP) is up more than 6% in the past month.

Neither Benzinga nor its staff recommend that you buy, sell or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: analyst forecasts Anheuser-Busch InBevEarnings Long Ideas Short Ideas Previews Trading Ideas ETFs

 

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