Shares of Boston Beer surged 7.6% in pre-market trading after posting better-than-expected 1Q results driven by top-line growth. Meanwhile, results were negatively impacted by cost pressures.
Including certain once-off items, Boston Beer’s (SAM) 1Q earnings more than tripled to $5.26 per share, compared to $1.49 reported in the prior-year period, and comfortably beat analysts’ expectations of $2.61. Net revenues of $545.1 million outpaced the Street’s estimates of $477.28 million and advanced 64.9% from the year-ago period driven by a 60.1% rise in shipments.
Depletions rose 48% year-over-year, while adjusted gross margin was 45.8%, down 100 basis points. Additionally, advertising, promotional, and selling expenses surged 43.9%. (See Boston Beer stock analysis on TipRanks)
Boston Beer CEO Dave Burwick said, “While we anticipate delivering margin improvements in 2021, our gross margins and gross margin expectations will continue to be impacted negatively until our volume growth stabilizes. While we are in a very competitive business, we are optimistic for continued growth of our current brand portfolio and innovations and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see.”
For 2021, excluding once-off items, the company projects revised adjusted EPS to be in the range of $22.00 to $26.00 per share, versus analysts’ expectations of $23.26.
Following the 1Q earnings beat, RBC Capital analyst Nik Modi lifted the stock’s price target to $1,538 (23.4% upside potential) from $1,378 and reiterated a Buy rating.
According to Modi, the reported quarter was again “exceptional” as the company’s Truly brand continues to beat expectations. Furthermore, the analyst expects Boston Beer to maintain its outperformance in the hard seltzer category.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 6 Buys versus 4 Holds. The average analyst price target of $1,353.78 implies 8.7% upside potential to current levels. Shares have increased 30.8% so far this year.
Boston Beer scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.