Shares of alcoholic beverage maker The Boston Beer Company (SAM -12.40%) got creamed on Friday after the company reported financial results for the third quarter of 2023. Investors were primarily disappointed with the company’s profits and outlook. And this is why Boston Beer stock dropped 12.4% on Friday.
Low growth and lower-than-expected profits
Boston Beer stock is now down 4% in 2023, which seems appropriate given the stagnation in its growth. In Q3, the company’s net revenue was up less than 1% year over year at $601.6 million. That said, its top line was largely what Wall Street had expected.
Boston Beer’s bottom line held the larger disappointment. The company’s Q3 net income was only $45.3 million, lower than estimates. Granted, that was markedly higher than net income of $27.3 million in the prior-year period. But higher salaries and other inflationary expenses limited some improvements to profitability.
Lower guidance
The market is also reacting to changes in Boston Beer’s outlook. Previously, the company was expecting a full-year 2% to 8% drop in shipments compared to 2022. And it guided for earnings between $6 per share and $10 per share.
Now, Boston Beer’s management says it expects a 5% to 7% drop in shipments. And it narrowed its earnings per share (EPS) range to $6.04 to $8.04. Both of these ranges are inside of its previous guidance, but the potential upside is lower than it was before, which was disappointing for investors.
On one hand, Boston Beer is doing a good job of maintaining sales and profits even though the beer industry is challenged by changing consumer behavior. On the other hand, investors might feel compelled to sit on the sidelines before buying the stock, waiting to see if the company can return to consistent growth.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boston Beer. The Motley Fool has a disclosure policy.
