Disappointing summer for Boston Beer leads to downgrade at Citi Research

[American Beer]
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Despite the successful launch of its infused vodka beverage Sun Cruiser, [https://seekingalpha.com/news/4495033-boston-beer-sees-success-with-the-sun-cruiser-brand] Boston Beer (NYSE:SAM [https://seekingalpha.com/symbol/SAM]) had a disappointing summer with its Twisted Tea suffering a 13% drop in sales and Truly sales down 15.5%. With still-healthy gross margins likely to face pressure from volume deleverage in the second half of the year and tariffs on imported aluminum, Citi Research downgraded their outlook on Boston Beer (NYSE:SAM [https://seekingalpha.com/symbol/SAM]) to Neutral from Buy and trimmed the price target by 8% to $235.

Shares are under pressure into Monday’s opening bell and expected to open lower for the first time in four days.

With Boston Beer (NYSE:SAM [https://seekingalpha.com/symbol/SAM]) now entering the seasonally slower segment of the year, the large declines at the company’s two largest brands – Twisted Tea at 56% of sales, and Truly at 22% of sales – makes “the path forward more challenging,” Citi analyst Filippo Falomi said.

And although margins have been the “bright spot” for SAM Falomi expects margin risk to accelerate in the second half of this year given the expected volume deleveraging on weak depletions and the reversal of overshipments in the first half of the year. Additionally, tariffs on aluminum will also compress margins, leading Falomi expect Q3 operating margin to drop 730 basis points year-over-year to 7.3% in Q3 and down 140 basis points yoy to 5.8% in FY25.

Falomi also expects SAM to lower 2025 guidance targets or point towards the lower end of the previous guidance range of $6.72 to $9.54 per share in a similar fashion to its beer industry peers, namely Constellation Brands (STZ [https://seekingalpha.com/symbol/STZ]) --which reports after the close on Monday-- and Molson Coors (TAP [https://seekingalpha.com/symbol/TAP]).

Falomi’s downgrade to Neutral matches the consensus outlook on Boston Beer (SAM [https://seekingalpha.com/symbol/SAM]) among other Wall Street analysts and Seeking Alpha’s Quant rating. Seeking Alpha authors, however, view Boston Beer (SAM [https://seekingalpha.com/symbol/SAM]) as a Buy with a score of 4.0 out of 5.

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