Why Boston Beer Company Inc Popped 19% in July
Shares of craft brewer Boston Beer Company Inc (NYSE: SAM) jumped 18.7% in July, according to data provided by S&P Global Market Intelligence, after reporting earnings from the second quarter of 2017.
Second-quarter revenue was up 1%, to $247.9 million, and net income rose 9.4%, to $29.1 million, or $2.35 per share. A big reason the stock spiked is that analysts were only expecting $1.41 per share in earnings. On top of the earnings beat, management increased the bottom end of full-year earnings guidance from $4.20 to $5.00 with the top end staying at $6.20 per share.
While results were strong, the trend is actually toward flattening revenue and volumes because local craft brewers are taking market share. Boston Beer helped create a beer trend that's so successful, it can't take much more market share without beating up on smaller brewers, who are the upstarts Boston Beer used to be.
Financially, it's positive to see Boston Beer reporting strong earnings on the bottom line, but the path to further growth will become more difficult. And with shares trading at 25 times the top end of full-year earnings guidance, the stock is looking more risky than it was a month ago.
I like the company long term, but its valuation is extremely high given the growth rate, which I don't see changing substantially going forward.
10 stocks we like better than Boston BeerWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Boston Beer wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 1, 2017
Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Boston Beer. The Motley Fool has a disclosure policy.