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Boston Beer Earnings: What to Watch

Expectations could hardly be higher for Boston Beer's (NYSE: SAM) earnings report in just a few days. While its craft beer products are struggling with slumping demand at bars and restaurants, the runaway success of Truly hard seltzer is lifting sales to new records. As a result, the company is set to close fiscal 2020 with head-turning growth although the wider industry struggled.

That enthusiasm means investors will be following the fourth-quarter earnings report set for Wednesday, February 17. So let's look at the key metrics to watch for in that announcement.

Image source: Getty Images.

Still winning share

There's no shortage of competitors in the booming hard seltzer space today, but Boston Beer should still show positive market share results on Wednesday. The Truly and Twisted Tea franchises helped depletions, a measure of sales, jump 40% through late September.

CEO Dave Burwick and his team predicted stable gains ahead, with growth landing between 37% and 42% for 2020. Constellation Brands (NYSE: STZ), for context, recently posted a 12% sales boost, while global conglomerates like Molson Coors (NYSE: TAP) are seeing flat results these days.

SAM Revenue (TTM) data by YCharts

Boston Beer had some supply challenges last quarter, as it did for most of the year. The surging demand for Truly at retailers has been hard to satisfy during the pandemic. We'll find out this week whether the company fixed those manufacturing bottlenecks, which might allow it to end the year on a positive growth note.

Paying for growth

The outlook isn't as positive on earnings, which are being pressured by Boston Beer's need to enlist other brewers to meet demand. Gross profit margin in Q3 dropped to 49% of sales from 48% a year ago, and investors might see a similar pinch this quarter as the company spends heavily to try to pad its early lead in the hard seltzer niche. "We will continue to prioritize volume delivery over margin optimization," Burwick said back in late October.

That's a small price to pay for a secure hold on the industry's biggest growth segment. But shareholders will still want to hear that Boston Beer is ramping up its own capacity so that it can bring all its production back into the fold in 2021.

Looking ahead

The company has a packed calendar for product releases this year, including one that brings together its two best-selling categories, hard seltzer and tea. There's a stronger version of Truly seltzer coming out, too.

In addition to updates on these launch expectations, look for a detailed 2021 outlook that likely projects surging growth with improving profitability. Boston Beer's last forecast called for depletions to rise by between 35% and 45% this year as gross profit landed at about 47%. The company will have three more months of sales and expense data to help it adjust these targets on Wednesday.

Judging by the stock's rally in recent months, investors will be looking for any changes to the outlook to be on the upside. But even if Wall Street gives a cool reception to the earnings announcement, Boston Beer is primed to once again lead the industry in growth in 2021.

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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Boston Beer and Constellation Brands. The Motley Fool has a disclosure policy.


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