Boston Beer Earnings: Resilient Twisted Tea Not Enough to Offset Hard Seltzer Weakness
We plan to reduce our $350 per share fair value estimate for narrow-moat Boston Beer by a low-single-digit percentage after absorbing its second-quarter results. Sales fell 4% due to a midteens hard seltzer volume contraction, while earnings per share dropped 7%. We now expect to model 2024 sales to fall 1% (versus a 1% rise previously) to incorporate a lower hard seltzer volume outlook, and cut our EPS estimate by 3% to $10.15. That said, we think management has prudently invested in product innovation in core and emerging beverage categories for longer-term growth, and our 10-year projections for mid-single-digit sales growth and low-teens average operating margins continue to look achievable. Shares remain undervalued.