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Here’s Why Boston Beer Continues to be Investors’ Favorite


Boston Beer Company Inc. SAM is having a bull run lately owing to its robust cost-savings initiatives as well as lower tax rate. Moreover, its commitment toward three-point growth plan and long-term innovation remain encouraging. Consequently, shares of Boston Beer have rallied 26.7% in the past six months, outperforming the industry’s gain of 1.3%.

Let’s delve deeper into the factors driving this Zacks Rank #1 (Strong Buy) stock.

Strategic Initiatives: A Key Growth Driver

Boston Beer looks well poised with its three-point growth plan, which focuses on revival of its Samuel Adams and Angry Orchard brands, cost saving initiatives and long-term innovation.

Firstly, this plan prioritizes the revival of the Samuel Adams and Angry Orchard brands via packaging, innovation, promotion and brand communication initiatives. Moving ahead, the company plans to launch new media campaigns for these brands.

Secondly, it deals with cost savings and efficiency projects. In fact, the company ensures that these savings are directed toward further brand development. In third-quarter 2017, the company witnessed improved gross margin and lower operating expenses owing to this cost savings project. Additionally, Boston Beer continues to anticipate improving gross margin by one percentage point every year through 2019.

Finally, the plan emphasizes on long-term innovation wherein Boston Beer focuses on maintaining the leadership of its Truly Spiked & Sparkling brand and ensures that it reaches full potential.

Acquisitions Bode Well

Boston Beer strongly believes in reinvesting its profits toward capital expenditures rather than distributing the same to its shareholders. In this regard, it has made significant investments toward acquiring brewing assets, enhancing research & development (R&D) as well as packaging and marketing of products. While Boston Beer is always seeking strategic opportunities to expand its business through inorganic means, we believe this will certainly help it capture considerable market share from rivals.

Splendid Surprise Trend, Upbeat Outlook

Boston Beer portrays a spectacular surprise trend with earnings beat for the fourth straight quarter while sales topped estimates for the second consecutive quarter. Results gained from gross margin improvement, lower operating costs owing to the company’s cost-saving initiatives as well as lower tax rate. Moreover, the company’s brand-building efforts and initiatives to add new products remain key revenue drivers.

Given the sturdy results, the company raised the lower-end of its previously stated earnings guidance range for the third-quarter 2017. Boston Beer now anticipates its adjusted earnings per share in the band of $5.60-$6.20 compared with $5.00-$6.20 projected earlier.

Do Beverages-Alcohol Stocks Grab Your Attention? Check These

Investors interested in the same industry may also consider stocks such as Brown Forman Corporation BF.B, Constellation Brands Inc. STZ and Craft Brew Alliance Inc. BREW, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brown Forman Corporation delivered an average positive earnings surprise of 6.9% in the trailing four quarters. Shares of Brown Forman have rallied 12% in the past three months.

Constellation Brands pulled off an average positive earnings surprise of 11.9% in the trailing four quarters. It has a long-term earnings growth rate of 19%.

Craft Brew came up with an average positive earnings surprise of 250.2% in the trailing four quarters. Shares of Craft Brew have gained 16.6% in a year.

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