Boston Beer’s (NYSE:SAM) Q3 Earnings Results: Revenue In Line With Expectations
Beer company Boston Beer (NYSE:SAM) met Wall Street’s revenue expectations in Q3 CY2024, but sales were flat year on year at $605.5 million. Its non-GAAP profit of $5.36 per share was 8.2% above analysts’ consensus estimates.
Is now the time to buy Boston Beer? Find out by accessing our full research report, it’s free.
Boston Beer (SAM) Q3 CY2024 Highlights:
- Revenue: $605.5 million vs analyst estimates of $601 million (in line)
- Adjusted EPS: $5.36 vs analyst estimates of $4.95 (8.2% beat)
- EBITDA: $98.15 million vs analyst estimates of $100.8 million (2.7% miss)
- Adjusted EPS guidance for the full year is $9 at the midpoint, missing analyst estimates by 5.9%
- Gross Margin (GAAP): 46.3%, in line with the same quarter last year
- Operating Margin: 7.6%, down from 10.2% in the same quarter last year
- EBITDA Margin: 16.2%, up from 15.2% in the same quarter last year
- Free Cash Flow Margin: 16.4%, down from 19.5% in the same quarter last year
- Market Capitalization: $3.49 billion
Company Overview
Known for its flavorful beverages challenging the status quo, Boston Beer (NYSE:SAM) is a pioneer in craft brewing and a symbol of American innovation in the alcoholic beverage industry.
Beverages, Alcohol and Tobacco
These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
Boston Beer is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from economies of scale.
As you can see below, Boston Beer’s demand was weak over the last three years. Its sales fell by 2.6% annually, showing demand was weak. This is a poor baseline for our analysis.
This quarter, Boston Beer’s $605.5 million of revenue was flat year on year and in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months, an acceleration versus the last three years. While this projection illustrates the market thinks its newer products will fuel better performance, it is still below average for the sector.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Boston Beer has shown impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.6% over the last two years, better than the broader consumer staples sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.
Taking a step back, we can see that Boston Beer’s margin expanded by 1.9 percentage points during that time. This shows the company is heading in the right direction, and because its free cash flow profitability rose more than its operating profitability, continued increases could suggest it’s becoming a less capital-intensive business.
Boston Beer’s free cash flow clocked in at $99.19 million in Q3, equivalent to a 16.4% margin. The company’s cash profitability regressed as it was 3.1 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.
Key Takeaways from Boston Beer’s Q3 Results
It was good to see Boston Beer beat analysts’ operating margin expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its EPS forecast for the full year missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4.2% to $289.15 immediately after reporting.
Boston Beer’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
