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BOSTON - Boston Beer Company (NYSE:SAM) reported third-quarter earnings that surpassed analyst expectations despite declining sales, as the brewer benefited from improved margins and operational efficiencies. Shares rose 1.9% following the announcement.
The maker of Samuel Adams, Truly Hard Seltzer, and Twisted Tea posted adjusted earnings per share of $4.25 for the third quarter, significantly beating the analyst estimate of $3.33. However, revenue fell 11.2% YoY to $537.5 million, slightly below the consensus estimate of $542.08 million. The company reported a 3% decrease in depletions and a 13.7% decrease in shipments compared to the same period last year.
Despite the sales decline, Boston Beer’s gross margin improved substantially to 50.8%, up 450 basis points from the prior year, driven by procurement savings, improved brewery efficiencies, and favorable product mix. The company raised its full-year EPS guidance to $7.80-$9.80 from the previous $6.72-$9.54, compared to analyst consensus of $8.99.
"Our depletions declined by 3% in the third quarter as volumes were pressured across the beer industry," said Chairman, Founder and CEO Jim Koch. "While the macroeconomic environment remains dynamic, we are encouraged by the positive consumer reaction to our Sun Cruiser brand innovation and a second consecutive quarter of growth in Angry Orchard."
The company’s advertising, promotional and selling expenses increased 11.3% to approximately $165 million as Boston Beer invested more heavily in brand media and local marketing, partially offset by lower freight costs due to reduced volumes.
CFO Diego Reynoso noted, "The progress we have made on our multi-year supply chain initiatives has enabled us to deliver significant gross margin improvements and solid free cash flow in a more dynamic industry volume environment."
Boston Beer maintained a strong balance sheet with $250.5 million in cash and no debt at the end of the quarter. The company has repurchased $161 million in shares year-to-date through October 17, with approximately $266 million remaining in its authorized buyback program.
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