On Friday, Citi made adjustments to its outlook on Boston Beer Company (NYSE: NYSE:SAM), lowering the price target to $290 from the previous $325, while maintaining a Neutral rating on the stock. The revision followed Boston Beer's second-quarter earnings report, which disclosed earnings per share (EPS) of $4.39. This figure fell short of both Citi's forecast of $4.82 and the broader consensus range of $4.89 to $5.00.
The company experienced a decline in depletions and shipments, with depletions down by 4.0% and shipments by 6.4%. These results contrasted with Citi's more modest depletion estimate of -6.0% and the consensus range, which anticipated a smaller decrease. Despite a slight recovery in June and early July, year-to-date depletions through July 20 stood at -2%.
Boston Beer also reported a gross margin of 46.0%, narrowly missing the consensus expectation of 46.3%. The company is actively working to rebuild lower distributor inventories, which contributed to the shipment decline, with efforts focused on July and August.
In response to the latest performance data, Boston Beer has revised its full-year 2024 guidance for shipments and depletions from a range of slightly negative to slightly positive to a range of slightly negative to flat. However, it has maintained its broad EPS guidance of $7 to $11. In light of these developments, Citi has also adjusted its 2024 EPS forecast for the company to $9.65, a decrease from the previous estimate of $10.00.
Citi's neutral stance on Boston Beer shares reflects a cautious outlook, with the firm not foreseeing a clear trajectory for the company to achieve sustained growth in depletions. Despite this, Citi acknowledges the potential for gross margin recovery and strategic initiatives to provide some stability for the stock's value.
In other recent news, Deutsche Bank raised its price target for the company's shares to $283, while Piper Sandler reduced its target to $344. Both firms have also adjusted their earnings per share estimates for Boston Beer, hinting at potential improvements in cost discipline.
Boston Beer's product portfolio has shown a mixed performance, with Twisted Tea showing positive growth, while other brands such as Truly are experiencing less favorable trends. Despite this, Morgan Stanley and Jefferies upgraded Boston Beer's stock rating, citing a balanced risk/reward scenario and expected growth in flavored malt beverages and ready-to-drink products.
In terms of mergers and acquisitions, Green Thumb Industries (OTC:GTBIF), a cannabis producer, has shown interest in a merger with Boston Beer, although no official discussions have been confirmed. Boston Beer reported a 3.9% revenue growth and a significant stock repurchase of $65 million in its first quarter 2024 earnings call.
InvestingPro Insights
As Boston Beer Company (NYSE: SAM) navigates through its current challenges, insights from InvestingPro provide a deeper look into the company's financial health and market position. With a market capitalization of $3.19 billion and a P/E ratio standing at 33.76, the company's valuation metrics offer a mixed picture. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 has improved to 28.08, suggesting a more favorable earnings perspective moving forward.
An interesting point for investors is Boston Beer's liquidity position, as highlighted by one of the InvestingPro Tips, which notes that the company holds more cash than debt on its balance sheet. This could provide a cushion against market volatility and enable the company to navigate short-term obligations with relative ease, as its liquid assets exceed short-term liabilities. Additionally, the company is trading near its 52-week low, which could signal a potential entry point for investors seeking to capitalize on any future recovery in the stock's performance.
For those considering an investment in Boston Beer, there are additional InvestingPro Tips that could be valuable in making a well-informed decision. In total, there are 9 more tips available, including insights on earnings revisions and stock valuation. To explore these tips and refine your investment strategy, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro. Discover more at: https://www.investing.com/pro/SAM
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