Shares of Boston Beer (NYSE: SAM) declined 10.7% in November, according to data from S&P Global Market Intelligence, giving up its post-earnings gains following a strong quarterly report.
To be sure, Boston Beer initially climbed more than 12% in the two weeks after the release of its third-quarter report in late October. Quarterly revenue climbed 24.2% year over year to $306.9 million, while net income rose 12.8% to $38 million. Thanks in part to stock repurchases over the past year, Boston Beer's earnings per share climbed 15.5% to $3.21. By contrast, most analysts were anticipating lower earnings of $3.17 per share on revenue of $271 million.
Boston Beer also told investors it now expects growth of between 12% and 15% for both shipments and depletions -- a key industry metric that measures how quickly its products travel from warehouses to consumer outlets -- resulting in a new 2018 earnings guidance range of between $7.10 and $7.30 per share (up from between $6.30 and $7.30 before).
Unfortunately -- and keeping in mind Boston Beer stock found itself up nearly 70% year to date on the heels of its report -- shares all but gave up their post-earnings gains as the broader market pulled back last month.
That's not to say the quarter was perfect. Boston Beer's growth was entirely driven by the strength of its Truly Spiked & Sparkling, Twisted Tea, and Angry Orchard brands, which collectively more than offset declines from its core Samuel Adams varieties. And make no mistake, it will take more time, financial resources, and solid business execution to return that brand to growth in the crowded craft beer space.
To be sure, Boston Beer simultaneously reduced its 2018 outlook to call for gross margin to be between 50% and 52%, compared to between 51% and 53% before -- a consequence of higher costs stemming from ongoing brand innovation and marketing efforts.
So barring a preliminary update or other material news between now and Boston Beer's next quarterly report in February 2019, I suspect Boston Beer stock will only continue to move in lockstep with the broader market.
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