Boston Beer Earnings Preview: Have Earnings Gone Flat?

Boston Beer SAM is scheduled to report its second-quarter 2011 results Tuesday, August 2, after the closing bell. The largest craft brewer in the U.S. has seen its market share increase even as overall beer consumption has fallen off. But earnings were disappointing in the past two quarters, so the question on investors' minds is whether the stock's momentum has gone flat. Analysts are looking for the company to report earnings of $1.20 per share, which is up from $1.13 in the same period of last year. That EPS estimate is the same as 60 days ago. The analysts' forecast also calls for the company to post revenues of $138.9 million, which is an increase of 7.3% from a year ago. As mentioned, Boston Beer fell short of consensus estimates in the past two quarters; before that it fell short in only one of the previous seven quarters. Looking ahead to the next quarter, analysts so far are looking for per-share earnings to be up 7.6% year-over-year and revenues that are 8.4% higher. The Company Boston Beer Company produces and sells about 20 beers under the Samuel Adams or the Sam Adams brand names. The Boston-based company also produces other malt beverages and hard cider products. Its offerings can be found primarily in North America, Europe, Israel and the Pacific Rim. The company was founded in 1984. During the three months that ended in June, the company blamed disappointing earnings on increasing advertising costs and it settled a dispute with a bottle supplier. Boston Beer also saw one of its longest standing board members pass away. Performance The company has a long-term earnings per share growth forecast of 22.7% and a return of equity of 28.1%. Its forward P/E ratio estimate is less than the trailing P/E ratio, and its PEG ratio is 1.1. The company reports no long-term debt. But only three of eight analysts rate the stock a Buy or Strong Buy. While the share price is nearly 30% higher than a year ago, shares are trading in the same neighborhood as six months ago. But the stock is above both the 50-day and 200-day moving averages. In the past six months, the stock's performance has been largely in line with the S&P 500, but it has underperformed both rival craft brewer Craft Brewer's Alliance HOOK and mega brewer Anheuser Busch InBev BUD, as well as the industry average. Action Items: Bullish: Traders interested in exchange traded funds might want to consider the following trades:

• PowerShares Dynamic Food & Beverage Portfolio PBJ: up more than 25% in the past year
• First Trust Consumer Staples AlphaDEX Fund FXG: up more than 29% in the past year

Bearish: Traders who prefer to stick with the bigger brewers might want to consider these positions:

• Anheuser Busch InBev BUD: up more than 8% year to date
• Molson Coors Brewing TAP: down more than 18% year to date
• SABMiller (SMBRY): up more than 27% year to date

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