Enjoy a Boston Beer, but pass on the stock
After a stellar quarterly earnings report, the stock has become much more expensive than those of larger rivals.
In the second quarter, profit at the maker of Samuel Adams beer surged 37% to $19.7 million, or $1.45 per share, from $14.4 million, or $1.06 per share, a year earlier. Net revenue, which excludes excise taxes, gained 23% to $181.3 million as core shipments jumped 21%. These results surpassed analysts' expectations of $1.34 per share profit on revenue of $175.4 million.
Boston Beer's results are remarkable for many reasons. First, the company is spending more, which is often a red flag for investors. In the latest quarter, the brewer spent $9.1 million on advertising, promotions and selling, an increase of 21%. In addition, Boston Beer said it will "continue to invest at a high rate in capital improvements," and it's bulking up its sales force.
The money seems to have been well spent.
Demand for the core Samuel Adams beer was strong in the quarter, as was demand for newer brands such an Angry Orchard, a hard cider that Boston Beer rolled out nationally during the second quarter, and Twisted Tea, a malt beverage. Also, this summer's launch of Samuel Adams Boston Lager and Samuel Adams Summer Ale in newly designed cans has been well received by drinkers and wholesalers.
Shares of the Boston brewer have been frothy -- in a good way -- gaining more than 30% this year and outperforming much larger multinational rivals such as Anheuser-Busch InBev (BUD), which rose 9.5%, and Molson Coors (TAP), which increased 18.3%. Boston Beer’s shares gained more than 14% Thursday after the earnings report was issued Wednesday.
However, at least for now, investors should enjoy the company’s beer and take a pass on its stock, which is really expensive, trading at a price-earnings multiple topping 46. Wall Street also thinks Boston Beer's stock price may grow stale. The shares closed Thursday at $204.17, well above analysts’ average 52-week price target of $152.17.
Though beer snobs may disagree, bigger might be better at the moment when it comes to brewers' stocks.
Anheuser-Busch InBev trades at a cheaper multiple than Boston Beer, at 20.8, while Molson Coors' multiple runs at about 23. But they’re not just cheap: Unlike Boston Beer, analysts think these stocks have room to run higher.
And that's Killer Companies.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
More from Top Stocks
- Do cable stocks have the right stuff?'
- Stock pick: Yamana Gold
- It's time to buy this iconic American stock
Copyright © 2014 Microsoft. All rights reserved.
Consumers are very status conscious in Asia, Africa and other emerging-market areas. This is especially true in China.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.