Boston Beer (SAM) Jump 10% as Truly Powers Results, Has Wall Street Cheering
Shares of The Boston Beer Company (NYSE: SAM) are trading about 10% higher in early action Friday after the company reported its revenue grew over 30% compared to a year ago, driven by its Truly Hard Seltzer. Better-than-expected numbers pushed analysts at Citi and Guggenheim, among others, to raise their price target on SAM.
3Q20 EPS was reported at $6.51, which is 78% higher compared to 2019. This number also easily exceeded the consensus of $4.50. Shipments rose 30.5% YoY while net sales were up 30.2%. Gross margins also came in higher-than-expected.
Net revenue came in at $1.27 billion (34.5% YoY).
"We achieved depletions growth of 36% in the third quarter. We believe that our depletions growth is attributable to our key innovations, quality and strong brands, as well as sales execution and support from our distributors,” said Jim Koch, chairman and founder of the Boston Beer Company.
Moreover, the company upgraded its guidance for 2020 to project depletion and shipment growth of 37%- 42% (from prior 27%-35%), and EPS between $14.00 and $15.00 (up from $11.70 and $12.70, previously). The market’s EPS consensus stood at $12.63.
Following the earnings report, Citi’s Wendy Nicholson raised the price target of SAM to $1,150.00 per share from the prior $1,015.00.
“We raise our 2020, 2021 and 2022 EPS estimates to $14.79 (+61% YoY), $21.00 (+42% YoY) and $24.20 (+15% YoY), respectively. Given the ~22x market multiple based upon Citi’s forecast for S&P 2021 EPS, our unchanged belief that SAM deserves to trade at a 150% premium to the market, and our 2021 EPS estimate of $21.00,” she wrote in today’s note.
Similarly, Guggenheim’s analyst Laurent Grandet hiked the price objective to $1,354.00 from the previous $1,142.00.
“Boston Beer reported 3Q EPS ahead of our above-consensus ests – despite softer volume due to supply constraints – driven almost entirely by lower ad expenses. Management provided strong FY20 guidance that implies a meaningful acceleration in 4Q ships. In addition, an early FY21 outlook suggests another year of confidently-strong innovation-driven Truly growth (incl tea). We reiterate our BUY as we think management is right to prioritize growth with line of sight to improve margin over time. We are increasing our EPS ests in FY20 / FY21 / FY22 to $15.77 / $26.86 / $40.69 (prev $13.27 / $22.11 / $34.62),” said Grandet in a note.