Boston Beer Co Earnings Preview: coming off a sizeable earnings miss last quarter, SAM looks to surprise investors in Q2 on an improving supply chain backdrop (336.83 +1.57)
Boston Beer Co (SAM) is set to report Q2 (Dec) earnings results today after the close, with a call to follow at 5:00pm ET. The S&P CapitalIQ consensus is for EPS to drop 2.7% yr/yr to $4.62, with sales growing 1.4% to $611.62 mln.
SAM has experienced difficulty recovering from its bet last year on the hard seltzer market. Shares are down over 30% on the year and roughly 65% from record highs during the summer of 2021.
However, conditions are getting better. Last quarter, SAM was optimistic that supply chain conditions would improve gradually throughout the year. This is further evidenced by the company reiterating its guidance on depletions and shipment growth of +4-10% yr/yr.
Still, SAM is not totally out of the woods. Inflation is pressuring gross margins, already causing a 560 bp drop in Q1 yr/yr to 40.2%.
On the bright side, SAM expects margins to show improvement as the year progresses due to an improving supply chain backdrop.
Inflation may also dampen growth in SAM's on-premise channels, which have yet to return to pre-pandemic levels. As of Q1, the on-premise share of total demand hovered around 13%, slightly below pre-COVID levels of approximately 16%.
However, encouragingly, SAM already noticed strong growth in on-premise across the board in Q1.
Last month, Constellation Brands' (STZ) MayQ results affirmed what SAM was already seeing in late April and commented that it has not seen meaningful behavior changes for beverage alcohol shoppers.
Anheuser-Busch Inbev (BUD) shared similar remarks in May.
For Q2, analysts expect SAM to post a profitable quarter after two straight periods of negative earnings. If inflationary pressures are not as fierce as headlines suggest, SAM may also surprise investors with a bottom-line beat, reversing the sizeable miss in Q1.
Lastly, with shares climbing ~11%, investors may sell into strength tomorrow if Q2 results do not pop. However, the stock is still down around 35% on the year, so decent results could spark a sizeable upward move. SAM currently trades at 27x forward earnings, a premium relative to STZ at 22x, BUD at 17x, and Molson Coors Beverage Company (TAP) at 15x.
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