Things You Must Know Before Boston Beer's (SAM) Q3 Earnings

The Boston Beer Company, Inc. (NYSE:SAM) is slated to report third-quarter 2019 results on Oct 29.

Notably, the company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 35.2%. Let’s discuss the factors that are likely to be reflected in the alcohol beverage producer’s upcoming quarterly release.

Factors at Play

Boston Beer’s third-quarter top line is likely to have benefited from sturdy depletions growth, improvement in shipment volumes as well as efforts to innovate brands and gains from recent buyout. Notably, the company has been witnessing higher depletions due to increases in its Truly Hard Seltzer and Twisted Tea brands, which is expected to have continued in the quarter under review.

Moreover, gains from the Dogfish Head Brewery buyout are likely to get reflected in Boston Beer’s third-quarter performance. In the last earnings call, management anticipated annual shipments and depletions growth of 3-4% for the second half of 2019, solely driven by contributions from the aforesaid buyout. Further, the company projected an increase of $50-$60 million in net revenues, with gross margin of roughly 50% for the rest of 2019, owing to gains from Dogfish Head.

All these factors are likely to have impacted Boston Beer’s third-quarter sales. Encouragingly, the Zacks Consensus Estimate for the company’s revenues is pegged at $364.7 million, which indicates an increase of 11.6% from the year-ago quarter’s figure.

However, higher advertising, promotional and selling expenses as well as increased general and administrative costs remained deterrents. These expenses might have affected Boston Beer’s operating margin and in turn earnings in the quarter under review. The company expects Dogfish Head’s operating expenses in the range of $20-$25 million for the second half of 2019. In addition, persistent softness in the Samuel Adams brand caused by softening of craft beer might show on the company’s performance in the upcoming quarterly results.

The Zacks Consensus Estimate for the company’s third-quarter earnings is pegged at $2.79, which suggests a year-over-year plunge of 13.1%. However, the consensus mark increased 7.7% in the past 30 days.

What Does the Zacks Model Say

Our proven model predicts an earnings beat for Boston Beer this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boston Beer has a Zacks Rank #2 and an Earnings ESP of +7.04%.

Other Stocks Likely to Deliver Earnings Beat

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Newell Brands Inc (NASDAQ:NWL) has an Earnings ESP of +6.73% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molson Coors Brewing Company (NYSE:TAP) has an Earnings ESP of +4.56% and a Zacks Rank #3.

Altria Group, Inc (NYSE:MO) presently has an Earnings ESP of +1.75% and a Zacks Rank #3.

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