Boston Beer Q4 Earnings Preview: Growing Competition May Cause Hangover

(RTTNews) - Craft brewer Boston Beer Co. Inc. (SAM) has been experiencing downtrend in its Sam Adams brand, due to increased competition, and a slowing in the Cider category. Meanwhile, the company is excited by the planned introduction of its Samuel Adams nitro series in the first quarter of 2016, and remains confident about the long-term outlook for the craft category at Samuel Adams brands.

To maintain the pace of innovation and to react quickly to any emerging opportunities, the company increases its investment in new beer and cider development capabilities.

While reporting third-quarter results, the company said its focus in 2016 will be on innovation within the Samuel Adams family, integrated programming across point of sale, promotions and media for all its brands, and prioritizing the core styles of Angry Orchard and Twisted Tea for increased distribution and promotion, and maximizing the Coney Island Hard Root Beer opportunity.

The company is due to release its fourth-quarter numbers after the bell on Thursday, February 18. Analysts polled by Thomson Reuters expect earnings of $1.13 per share on revenue of $224.18 million. Analysts' estimate typically exclude certain special items.

In the previous quarter, the company reported higher profit, largely due to increased net revenue, increased gross margin and a lower income tax rate, partially offset by increases in advertising, promotion and selling expenses.

FY15 Guidance

The company now sees full year 2015 earnings per share to be $7.40, a decrease in the range from the previous communicated estimate of $7.10 - $7.50. Full year depletions and shipments growth is expected to be between 3% and 6%, a decrease in the range from the previous communicated estimate of between 6% and 9%.

Boston Beer estimates price increases of between 1% to 2%, and intends to increase investments in advertising, promotion and selling expenses by between $30 million and $35 million. This does not include any increases in freight costs for the shipment of product to our distributors. Effective tax rate to be about 37% in 2015.

Q3 Overview

The company's third-quarter net income was $38.6 million or $2.85 per share compared to $37.9 million or $2.79 per share in the prior year period.

Net revenue for the third quarter was $293.1 million, a 9% increase compared to the previous year's revenue of $269.7 million, mainly due to core shipment growth and increased revenue per barrel due to product mix.

Third quarter 2015 gross margin increased to 53.6% compared to 53% in the third quarter of 2014. This is primarily due to price increases and lower ingredient costs that were partially offset by product mix effects.

Depletions grew 6% from the comparable 13 and 39 week periods in 2014.

Martin Roper, the company's President and CEO stated, "In the third quarter, our depletions growth benefited from strength in our Coney Island, Twisted Tea, Traveler and Angry Orchard brands that offset a decline in some of our Samuel Adams styles."