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On Wednesday, Morgan Stanley updated its outlook on Boston Beer Company (NYSE:), maintaining an Underweight rating and lowering its price target from $285 to $275. The company's analysis follows Boston Beer's fourth-quarter results and the release of its fiscal 2024 earnings per share (EPS) outlook, which is about 20% below mid-point consensus.
The company's expected gross profit recovery is also expected to be lower than expected due to third-party production shortfalls and fees related to upfront costs.
Boston Beer's depletion trend showed some improvement, moving from a 2% decline in the third quarter to a 1% decline in the fourth quarter on a comparable week basis. However, year-to-date depletion has decreased by 2%. The company's FY24 forecast includes potential outcomes for shipments and depletion ranging from low-single-digit declines to low-single-digit growth, leaving market direction uncertain. It shows.
A slowdown in sales volume growth for its main product, Twisted Tea, was pointed out as a cause for concern. Scanner data shows that growth has fallen from mid-30% growth last summer to low 20% growth in the fourth quarter and low teens year-to-date. The report also highlighted that Boston Beer's hard seltzer brand, Truly, is expected to continue losing market share in the declining malt-based hard seltzer category throughout the year.
Following the company's fourth-quarter earnings report, Morgan Stanley lowered Boston Beer's 2024 and 2025 EPS estimates by 18% and 15%, respectively. The company's revised price target of $275 reflects these adjustments and the company maintains an Underweight rating on the stock.
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