Boston Beer Company (SAM) Smashes Estimates And Stock Surges Over 20%

By Amit Chowdhry ● Jul 24, 2020
  • Boston Beer Company Inc (NYSE: SAM) — the company behind Sam Adams, Twisted Tea, Angry Orchard, and Truly Hard Seltzer — announced its Q2 earnings report today and it smashed analyst estimates

Boston Beer Company Inc (NYSE: SAM) — the company behind Sam Adams, Twisted Tea, Angry Orchard, and Truly Hard Seltzer — announced its Q2 earnings report today and it smashed analyst estimates. As a result, the company’s stock priced soared over 20% from $710.82 at 9:30AM ET to $797.50 at 12:37PM ET.

The company earned $4.88 per share for the second quarter based on revenue of $452.1 million. Analysts were expecting less than $430 million in revenue. And Boston Beer hit a net income of $60.1 million for the quarter — which is an increase of 116% year-over-year. Shipment growth was 39.8% and gross margin decreased from 49.9% last year to 46.4%.

The Truly hard seltzer brand saw tremendous growth. And Twisted Tea hit double-digit volume growth rates for the quarter.

How has the pandemic affected Boston Beer? It primarily showed reduced keg demand from the on-premise channel along with higher labor and safety-related costs at the company’s breweries. For the first half of 2020, Boston Beer recorded COVID-19 related pre-tax reductions in net revenue and increases in other costs that total $14.1 million — of which $10 million was recorded in the first quarter and $4.1 million for the second quarter.

KEY QUOTES:

“As the world continues to grapple with the COVID-19 pandemic, our primary focus continues to be on operating our breweries and our business safely and supporting our partners in the beer industry. Supporting the communities in which we work and live is one of our core values and we are very happy that our Samuel Adams Restaurant Strong Fund has raised $5.4 million thus far to support bar and restaurant workers who are experiencing hardships in the wake of COVID-19.

Working with the Greg Hill Foundation, this Fund is committed to distributing 100% of its proceeds through grants to bar and restaurant workers across the country. We achieved depletions growth of 46% in the second quarter, of which 42% is from Boston Beer legacy brands and 4% is from the addition of Dogfish Head brands. I am tremendously thankful for the efforts of our coworkers in achieving our ninth consecutive quarter of double-digit growth, while maintaining a focus on quality and innovation.

We are also thankful to our outstanding distributors and retailers for their focus during COVID-19. Our business in the second quarter was strong, but uncertainties due to COVID-19 remain. These uncertainties include our ability to continue to operate our breweries at a level of safety that meets our standards, the continued ability to distribute to off-premise retail locations, and the timing of the re-opening of on-premise retail locations.

We will continue to work hard throughout the COVID-19 pandemic and prioritize safety above all else. I am very proud of the passion, creativity and commitment to community that our company has demonstrated during this pandemic. We remain positive about the future growth of our brands and are happy that our diversified brand portfolio continues to fuel double-digit growth.”

— Jim Koch, Chairman and Founder of Boston Beer Company

“Our depletions growth in the second quarter was a result of increases in our Truly Hard Seltzer and Twisted Tea brands and the addition of the Dogfish Head brands that were only partially offset by decreases in our Samuel Adams and Angry Orchard brands. The growth of the Truly brand, led by Truly Hard Lemonade, has accelerated and continues to grow beyond our expectations.

Since early January, Truly has grown its velocity and its market share sequentially while other national, regional and local hard seltzer brands have entered the category. Truly is the only hard seltzer, not introduced earlier this year, to grow its share during 2020. We will continue to invest heavily in the Truly brand and work to improve our position in the hard seltzer category as competition continues to increase.

We are excited about our new Truly advertising campaign that showcases colors, variety and joy to hard seltzer drinkers through four spots, but we have been deliberately slow to roll out this campaign given the consumer environment surrounding COVID-19 and it is too early to know if it will resonate with drinkers. Twisted Tea continues to generate double-digit volume growth rates that are well above full-year 2019 trends.

We expect to increase our brand investments in the second half compared to the first half and see significant distribution and volume growth opportunities for our Truly, Twisted Tea and Dogfish Head brands. Samuel Adams and Angry Orchard’s volumes continue to decline, as they are more deeply impacted by the effect of COVID-19 on on-premise retailers.

We are encouraged that Samuel Adams Boston Lager and Angry Orchard Crisp Apple both have experienced double-digit growth in the measured off-premise channels during the quarter. We continue to work on returning these brands to growth, but do not expect them to grow during 2020 because of on-premise closures.

I am pleased that our overall business has shown great momentum and depletion improvements during the first half of the year. Given our trends for the first half and our current view of the remainder of the year, we’ve adjusted our expectations for higher 2020 full-year earnings, depletions and shipment growth, which is primarily driven by the strong performance of our Truly and Twisted Tea brands.”

— Dave Burwick, President and CEO at The Boston Beer Company

Disclosure: I have a small amount of SAM shares in my portfolio.