A month has gone by since the last earnings report for Boston Beer (SAM Quick QuoteSAM - Free Report) . Shares have lost about 3.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Boston Beer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Boston Beer Q4 Earnings & Revenues Miss on Soft Trends

Boston Beer reported an adjusted loss per share of 9 cents in fourth-quarter 2021, reflecting a significant decline from adjusted earnings of $6.78 per share reported in fourth-quarter 2020. The loss per share also significantly lagged the Zacks Consensus Estimate of earnings of $3.27. The dismal results were mainly due to the decrease in revenues due to lower shipment volumes, partly offset by lower operating expenses.

Net revenues declined 24.5% year over year to $348.1 million and missed the Zacks Consensus Estimate of $437.1 million. Excluding excise taxes, the top line fell 24.2% year over year to $373.7 million. The decline mainly stemmed from lower production and shipment volumes due to the slowdown in growth trends for the Hard Seltzer category. The Hard Seltzer category’s growth decelerated to 13% from 158% in 2020.

Shipment volume fell 24.5% to 1.5 million barrels in the fourth quarter, driven by declines in the Truly Hard Seltzer and Angry Orchard brands, partially offset by increases in Twisted Tea, Samuel Adams and Dogfish Head brands. The fourth-quarter shipment decrease also resulted from a more aggressive wholesaler inventory reduction than expected, primarily affecting Truly Hard Seltzer.

In the fourth quarter, the company recorded total indirect volume adjustment costs of $52 million, of which $9.2 million was accounted as a reduction in net revenues and $42.8-million as an increase in the cost of goods sold.

Depletions grew 15% on gains in the Twisted Tea, Samuel Adams, Truly Hard Seltzer, Angry Orchard and Dogfish Head brands. This marked the 14th successive quarter of double-digit growth in depletions. All of the company’s brands grew depletions in the fourth quarter, with Twisted Tea being the fastest-growing one of the top 25 brands in the fourth quarter. Truly generated 57% of all hard seltzer category growth in the quarter. Additionally, the Truly brand increased household penetration by 22%, making it the second-highest penetrated brand in all of beer.

Depletions for the year-to-date period (the seven weeks) ended Feb 12, 2022, have declined 26% from that witnessed in the year-ago period. For the same period, shipments have decreased 26%.

Costs & Margins

The gross profit declined 53.9% year over year to $99.8 million. The gross margin contracted 1,820 basis points to 28.7% from 46.9% in the year-ago quarter, owing to the aforementioned indirect volume adjustment costs as a result of the hard seltzer slowdown and higher materials costs, partly negated by price increases.

Advertising, promotional and selling expenses fell 2.6% in the reported quarter to $137.7 million. The decline was driven by lower brand investments, particularly in media and production, offset by higher investments in local marketing and increased freight to distributors, owing to higher freight rates.

General and administrative expenses increased 17.6% year over year to $36.7 million mainly due to a rise in external services costs, increased salaries and benefits costs.

Financials

As of Dec 25, 2021, Boston Beer had cash and cash equivalents of $26.9 million, and total stockholders’ equity of $983.4 million. The company currently has $150 million in its line of credit, which, along with its cash position, will be sufficient to meet cash requirements.

For 2022, capital spending is anticipated to be $140-$190 million, backed by the current spending and investment plans.

Outlook

For 2022, Boston Beer envisions adjusted earnings per share of $11.00-$16.00, excluding the impacts of ASU 2016-09. However, it expects the earnings guidance to be highly sensitive to changes in volume projections mainly due to the slowdown in the hard seltzer category and the supply-chain performance.

Depletions and shipments are predicted to increase 4-10%. The company expects distributors to keep inventory levels below 2021 levels in terms of weeks on hand, as the need for peak season inventory pre-builds is greatly reduced due to its increased production capacity. Consequently, it expects shipments to decline in the first quarter and return to growth in the second quarter. The company expects national price increases of 3-5%.

It anticipates a gross margin of 45-48%. Investments in advertising, promotional and selling expenses are expected to be $0-$20 million. The advertising, promotional and selling guidance does not assume any changes in freight costs for the shipment of products to its distributors. The non-GAAP effective tax rate is anticipated to be 26%, excluding the impacts of ASU 2016-09.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -26.92% due to these changes.

VGM Scores

Currently, Boston Beer has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Boston Beer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.