What Happened?
Shares of beer company Boston Beer (NYSE: SAM) jumped 3% in the morning session after the release of a favorable Consumer Price Index (CPI) report showed inflation cooling more than anticipated. The July report from the Bureau of Labor Statistics indicated a year-over-year inflation rate of 2.7%, just below the 2.8% economists had forecast. This suggests that price pressures on consumers may be easing. Particularly beneficial for the sector was the news that the food index remained flat, with grocery prices even declining by 0.1% month-over-month. This development is seen as a positive for the profitability of food, beverage, and personal care companies, as lower input costs and increased consumer purchasing power could boost sales. A Federal Reserve official's comments on the same day, noting that consumer spending fundamentals remain solid, further bolstered investor confidence in the sector's resilience.
After the initial pop the shares cooled down to $218.59, up 2.1% from previous close.
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What Is The Market Telling Us
Boston Beer’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 18 days ago when the stock gained 5.5% on the news that the company reported second-quarter earnings that showed a significant profit beat and strong guidance, which overshadowed a miss on revenue. The brewer's earnings per share of $5.45 easily surpassed Wall Street's expectations. However, revenue fell slightly short of forecasts, and depletions, a key indicator of consumer demand, decreased by 5% compared to the prior year. Investors appeared to focus on the company's improved profitability. Gross margin, which measures the profit on each sale, expanded significantly to 49.8%, an increase of 380 basis points year-over-year. Management attributed this improvement to "better-than-expected brewery efficiencies" and "ongoing productivity initiatives" that helped mitigate the impact of tariffs. Furthermore, Boston Beer provided a full-year earnings forecast that was viewed as better-than-feared, reinforcing investor confidence in its operational strength despite industry-wide demand challenges.
Boston Beer is down 27.4% since the beginning of the year, and at $218.59 per share, it is trading 32.4% below its 52-week high of $323.56 from November 2024. Investors who bought $1,000 worth of Boston Beer’s shares 5 years ago would now be looking at an investment worth $267.01.
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