Boston Beer Co. soon may have to lower its expectations for the year as its hard-seltzer business “deteriorates further,” analysts at Goldman Sachs said Tuesday.
The analysts downgraded their rating on Boston Beer
shares to sell, from the equivalent of hold, saying they see “an even greater negative risk/reward” balance for the hard-seltzer category.
Distributors are cutting down their hard-seltzer inventory further and drops in volume for Boston Beer’s Truly hard seltzer brand accelerate, which create more shelf-space losses at retailers and contributes to ongoing margin pressures, the analysts, led by Bonnie Herzog, said in a note.
And Boston Beer’s Twisted Tea, the beverage maker’s “hard” ice tea introduced last year, may not be enough, the Goldman analysts said.
“While distributor sentiment around Twisted Tea was generally positive, with most indicating significant future growth potential, we do not believe that Twisted Tea (or SAM’s other innovations) will be enough to offset Truly’s declines this year or next,” they said.
Boston Beer executives may have to lower fiscal 2022 guidance across the board, including gross margin and per-shares earnings guidance, the Goldman analysts said.
The analysts lowered their 2022 EPS estimate by 27% to $9.78, compared with management’s guidance of between $11 a share and $16 a share, and a FactSet consensus of $12.03.
The Goldman analysts also lowered their price target on Boston Beer to $318, flat in relation to Tuesday’s prices.
Shares of Boston Beer have lost 37% this year, compared with losses of around 16% for the S&P 500 index.
In the same note, the Goldman Sachs analysts upgraded Molson Coors Beverage Co.
stock to neutral, saying they are more positive about the company given “some signs of stabilization” for its Miller Lite and Coors Light brands and fewer out-of-stock problems.
Molson Coors is also seen as a “defensive/value stock” that could benefit from consumers trading down in a possible recession, the analysts said. Shares of Molson Coors are up 20% for the year.