What Should Investors Take Away From Boston Beer's Earnings?

After two years of supply-demand imbalances, what numbers should investors be looking at? 

Boston Beer Company (NYSE: SAM) stock is trading 73% lower than its 52-week high. And the company’s first-quarter 2022 revenue and earnings are projected to come in lower on a year-over-year (YOY) basis. As investors are aware, it’s all about the guidance right now. Unfortunately, it’s possible that investors may have to wait for another quarter before the guidance is clear. That would suggest that the stock may have further to fall.  

However, the consensus price target of the analysts tracked by MarketBeat puts SAM stock at $640.31. That’s an 82% upside from the stock’s current level. And even though the company has had its price target lowered by two analysts in the last month, the average price of $470 is still 25% higher than the stock’s current price.  

Something has to give, doesn’t it? That’s what we’ll take a look at in this article. 

What Will Earnings Say? 

At this time, the company is expected to report earnings per share (EPS) of $2.06 which will be 60% lower than the $5.26 EPS the company booked in the year before quarter. Revenue is also expected to come in on the light side on a year-over-year basis. Estimates are for the company to post revenue of $448 million as opposed to $545 million in the same quarter in 2021.  

This is one of those times when I believe that a better comparison is to 2019. When you do that, the company’s EPs will be 28% higher and revenue will be 35% higher.  

This may feel like an accounting trick, but I believe in this case it’s warranted. The company, and its stock, has been on a rollercoaster ride that was based on a lot of pandemic-driven supply and demand assumptions.  

Pulling it Forward 

When I look at the last year of earnings reports for Boston Beer, it’s hard not to see this as a case of demand getting pulled forward. After nine months of restrictions, a surge in revenue and earnings was inevitable.  

But it’s also completely logical to see that with two separate variants creating an uneven re-opening throughout the country that some of that demand was going to taper off. In my opinion, that more than a weakness in one category or another, is the challenge facing SAM stock investors at the moment.  

However, in fairness, let’s split the difference between the two years. That would give Boston Beer and EPS of $1.94 and revenue of $437.9 million. That would be a 6% gain in EPS and flat revenue (about a 2% increase). But the stock is trading at a discount of nearly 20% to its pre-pandemic level. On the other hand, the macroeconomic environment is vastly different as the company is not immune to the effects of inflation.  

I’ll say it again, something has to give. 

It May be Time to Sip on SAM Stock 

I’ve had SAM stock on my watchlist for some time, but I wasn’t going to jump on a falling knife. However, with the stock down 73% from its 52-week high, it’s starting to feel like the time is right. The earnings report may tip the scale. Or not. This is a very fluid (pardon the pun) sector. And I don’t know if this earnings report will be the one that provides clarity. 

If you’re looking for an easy answer, I don’t have one. If earnings come in below expectations, then I may have to rethink my thesis. But if they come in at or slightly above, I may be looking to put my toe in the water here. This will be the first summer where things may begin to feel normal throughout much of the country. And that’s something we can drink to.