On Wednesday, Citi adjusted its outlook on Boston Beer Company (NYSE:SAM), reducing its price target from $370.00 to $350.00, while keeping a Neutral rating on the stock. The adjustment follows Boston Beer's fourth quarter 2023 earnings report, which revealed a loss per share of $1.49, a steeper decline than Citi's estimate of a $0.64 loss and the Visible Alpha consensus of a $0.56 loss.
The company experienced softer depletions and shipment volumes, alongside weaker gross margins due to higher impact from shortfall fees.
Boston Beer's reported depletions were down 9%, which was slightly below the consensus of an 8.2% decrease. When adjusted for one fewer week in the comparison period, the depletions were down by 1%. Additionally, the company has provided its initial full-year 2024 guidance, forecasting shipments and depletions to range from a low single-digit decrease to a low single-digit increase, with earnings per share projected between $7.00 and $11.00. These expectations fall below the mid-point of market projections.
In conjunction with the financial results, Boston Beer announced a CEO transition. Michael Spillane, who currently serves as the lead director, will take over the role from retiring CEO Dave Burwick effective April 1, 2024. In response to these updates, Citi has also revised its 2024 earnings per share estimate for Boston Beer down to $10.20.
Citi's analyst noted the challenges in envisioning a return to sustained growth in depletions for Boston Beer, especially with the company's valuation remaining high at over 30 times earnings. The firm's lowered price target reflects an expected total return of 7% based on the after-hours trading price of $328.00. This cautious stance is maintained as the path to growth remains unclear for the beverage company.
InvestingPro Insights
As Boston Beer Company (NYSE:SAM) navigates through its recent earnings report and CEO transition, InvestingPro data and tips provide a deeper dive into the company's financial health and market position. According to real-time data from InvestingPro, Boston Beer has a market capitalization of $4.47 billion, reflecting the scale of the business in the competitive beverage industry. The company's P/E ratio as of the last twelve months ending Q3 2023 stands at 44.91, indicating how much investors are willing to pay for a dollar of earnings, which is a crucial metric in assessing market expectations.
InvestingPro Tips highlight some key strengths for Boston Beer. Notably, the company has a perfect Piotroski Score of 9, suggesting strong financial health and operational efficiency. Additionally, Boston Beer is trading at a low P/E ratio relative to near-term earnings growth, which could signal that the stock is undervalued given its growth prospects. This is particularly relevant for investors considering the company's guidance for the full year 2024, with earnings per share projected between $7.00 and $11.00.
Other notable InvestingPro Data metrics include a PEG ratio of 0.26 for the last twelve months as of Q3 2023, which may suggest that the stock's price is reasonable relative to its earnings growth rate. Moreover, Boston Beer's gross profit margin for the same period was 42.18%, showcasing the company's ability to maintain profitability despite the market challenges it faces.
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