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Credit Suisse Has Rated Boston Beer Company ‘Underperform’

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Price movement

Boston Beer (SAM) has a market cap of $2.0 billion. It fell 1.4% to close at $162.15 per share on September 16, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -6.9%, -13.1%, and -19.7%, respectively, on the same day.

SAM is trading 11.2% below its 20-day moving average, 9.6% below its 50-day moving average, and 8.8% below its 200-day moving average.

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Related ETFs and peers

The Vanguard Extended Market ETF (VXF) invests 0.05% of its holdings in Boston Beer. The ETF tracks a market-cap-weighted version of the S&P Total Market Index, excluding all S&P 500 stocks. The YTD price movement of VXF was 7.5% on September 16.

The iShares Russell 2000 (IWM) invests 0.15% of its holdings in Boston Beer. The ETF tracks a market-cap-weighted index of US small-cap stocks. The index selects stocks ranked 1,001–3,000 by market cap.

The market caps of Boston Beer’s competitors are as follows:

  • Constellation Brands (STZ): $33.4 billion
  • Molson Coors Brewing (TAP): $22.3 billion
  • Compañia Cervecerias Unidas (CCU): $3.7 billion

Boston Beer’s rating

Credit Suisse has initiated coverage of Boston Beer with an “underperform” rating and set the stock’s price target at $156 per share.

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Performance of Boston Beer in fiscal 2Q16

Boston Beer reported fiscal 2Q16 net revenue of $244.8 million, a fall of 2.9% compared to $252.2 million in fiscal 2Q15. The company’s gross profit margin and operating income fell 4.0% and 10.7%, respectively, in fiscal 2Q16 compared to the prior year’s period. It sold 1.1 million barrels in fiscal 2Q16, a fall of 4.0% compared to fiscal 2Q15.

Its net income and EPS (earnings per share) fell to $26.6 million and $2.06, respectively, in fiscal 2Q16 compared to $29.9 million and $2.18, respectively, in fiscal 2Q15.

Boston Beer’s cash and cash equivalents fell 70.7%, and its inventories rose 8.3% in fiscal 2Q16 compared to fiscal 4Q15. Its current ratio fell to 1.5x, and its debt-to-equity ratio rose to 0.43x in fiscal 2Q16 compared to a current ratio and a debt-to-equity ratio of 2.0x and 0.40x, respectively, in fiscal 4Q15.

Projections

The company has made the following projections for fiscal 2016:

  • EPS of $6.40–$7
  • gross margin of 50%–52%
  • effective tax rate of ~36.3%
  • depletion and shipments percentage change of -4%–0%.

Now let’s take a look at General Motors (GM).

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