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On Wednesday, Morgan Stanley updated its outlook on Boston Beer Company (NYSE:), reducing the stock’s price target to $275 from $285, while keeping an Underweight rating. The firm’s analysis followed Boston Beer’s fourth-quarter results and the release of its fiscal year 2024 earnings per share (EPS) guidance, which was approximately 20% below the consensus at its midpoint.
The company’s expected gross margin recovery is also predicted to be lower than anticipated due to fees related to third-party production shortfalls and pre-payment expenses.
Boston Beer’s depletion trends showed a slight improvement, moving from a 2% decline in the third quarter to a 1% decline in the fourth quarter on a comparable weeks basis. However, year-to-date, depletions have decreased by 2%. The company’s forecast for FY24 includes a range of potential outcomes for shipments and depletions, varying from a low single-digit decline to low single-digit growth, indicating uncertainty in the market’s direction.
The slowdown in volume growth for Twisted Tea, a key product, was noted as a concern. Scanner data revealed a decrease from mid-30% growth last summer to low 20% in the fourth quarter and high teens year-to-date. The report also highlighted that Truly, Boston Beer’s hard seltzer brand, is expected to continue losing market share in the declining malt-based hard seltzer category throughout the year.
Following the fourth-quarter earnings report, Morgan Stanley has revised its EPS estimates for Boston Beer downward for fiscal years 2024 and 2025 by 18% and 15%, respectively. The firm’s revised price target of $275 reflects these adjustments and the maintained Underweight rating on the company’s shares.
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