On Wednesday, Morgan Stanley (NYSE:MS) updated its outlook on Boston Beer Company (NYSE:SAM), reducing the stock's price target to $275 from $285, while keeping an Underweight rating. The firm's analysis followed Boston Beer's fourth-quarter results and the release of its fiscal year 2024 earnings per share (EPS) guidance, which was approximately 20% below the consensus at its midpoint.
The company's expected gross margin recovery is also predicted to be lower than anticipated due to fees related to third-party production shortfalls and pre-payment expenses.
Boston Beer's depletion trends showed a slight improvement, moving from a 2% decline in the third quarter to a 1% decline in the fourth quarter on a comparable weeks basis. However, year-to-date, depletions have decreased by 2%. The company's forecast for FY24 includes a range of potential outcomes for shipments and depletions, varying from a low single-digit decline to low single-digit growth, indicating uncertainty in the market's direction.
The slowdown in volume growth for Twisted Tea, a key product, was noted as a concern. Scanner data revealed a decrease from mid-30% growth last summer to low 20% in the fourth quarter and high teens year-to-date. The report also highlighted that Truly, Boston Beer's hard seltzer brand, is expected to continue losing market share in the declining malt-based hard seltzer category throughout the year.
Following the fourth-quarter earnings report, Morgan Stanley has revised its EPS estimates for Boston Beer downward for fiscal years 2024 and 2025 by 18% and 15%, respectively. The firm's revised price target of $275 reflects these adjustments and the maintained Underweight rating on the company's shares.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.