Staying at home has boosted the alcohol beverage industry, which saw sales spike by 55% — in just one week in March, asserts Mike Cintolo, growth and income expert and editor of Cabot Top Ten Trader.
That’s great for the mega wine, beer, and spirits companies, but tough for the 8,000 or so U.S. craft brewers, like Boston Beer (SAM). The maker of Sam Adams and many other alcoholic beverages traditionally sells some 85% of their products to bars and restaurants.
Indeed, the company missed estimates on both earnings and revenues for its first quarter, with large keg returns from distributors and retailers and $4.2 million of other COVID-19-related costs crimping results.
Even so, revenues grew 31% on a similar-sized increase in barrel shipments, thanks in part to better-than-expected growth for the Truly brand, including its newly launched Truly Hard Lemonade.
Forecasts for this quarter are revenues of $394 million and EPS of $2.35, with a return to year-over-year earnings growth likely in Q3. Once the pandemic ceases, analysts believe the overall craft beer industry will rebound to its recent 10% growth pattern, and Boston Beer will surely benefit.
M&A activity was strong in 2019, and after this interruption, we may see more opportunities as some of the brewers may be ripe for being swallowed up after the virus shut-in.
Boston Beer certainly seems to be one of the firms that could be on the hunt, as it’s faring better than most of its competition, partially thanks to its exposure to the hard seltzer market — a fast growing category. Bottoms up.
Technically, SAM topped in July of last year and fell from 445 to 336 over a few weeks, retested that area a few times and then finally crashed below it with the market in March.
But it’s hard to find better action since the low — SAM has risen five weeks in a row back to new high ground, including a strong-volume, post-earnings reaction. We wouldn’t be surprised to see a little giveback, but the stock looks like it wants to head higher.
