Wednesday, February 22, 2017

Earnings - WAB & SAM

We have earnings from two of our holdings that haven't had the best stretch for us.  Wabtech(WAB) and Boston Beer Company(SAM) are our two most recent earnings reports. Wabtech reported their quarter yesterday while Boston Beer reports after the close today.

Wabtech(WAB) reported Q4 and FYE'16 results yesterday. Q4 EPS came in at $0.42 on revenues of $759 million, both were down from the prior year.  For 2016 the company had EPS of $3.34 on revenues of $2.93 billion, which were down from $4.10 & $3.3 billion respectively. Sales lagged mainly due to the Freight Group which saw lower revenues from the control related equipment, and new freight cars/locomotives. The company gave guidance for 2017.

  • Revenues of $4.1 billion
  • EPS of $3.95-$4.15(excluding charges from Faiveley acquisition)
  • Expects results to be stronger in 2nd half. 
Here is management's remarks

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “During 2016 we faced many challenges, including significant headwinds in our freight and industrial markets. Yet, our financial results were among the best in our history, we generated more cash from operations than net income, and we completed the most important strategic acquisition we’ve made to date. I’m pleased with how our team responded to difficult market conditions, some of which will persist in 2017. We will continue to control what we can by managing our costs aggressively, while working diligently on the integration of Faiveley. We will also continue to invest in our balanced growth strategies and expect to benefit from our diversified business model and rigorous application of the Wabtec Excellence Program.”

Boston Beer(SAM) reported after the close and analysts were expecting EPS of $1.22 on revenues of $214 million. For Q4 EPS came in at 1.75 on revenues of $219 million.  For 2017 EPS came in at $6.79 on revenues of 906 million.  The company is trading at a TTM P/E of 24 and a forward P/E of  between 26-39 on 2017 guidance.  The company expects to earn between $4.20-$6.20 in 2017 with a gross margin of 51-52%.  Overall I'm disappointed. One because I know I bought early, and two the company is doing it's best to handle the increasing competition.  It's a good thing I have a long term view with this one.  Here is managements remarks

Jim Koch, Chairman and Founder of the Company, commented, "We are disappointed with our depletion trends in 2016, which have remained weak so far in 2017. These trends are affected by the general softening of the craft beer category and cider category and a more challenging retail environment with a lot of new options for our drinkers. New craft brewers continue to enter the market and existing craft brewers are expanding their distribution and tap rooms, with the result that drinkers are seeing more choices, including a wave of new beers in all markets. We were particularly disappointed with the performance of the first of our new spring seasonal beers, Samuel Adams Hopscape. We are introducing later this month our second spring seasonal, Samuel Adams Fresh as Helles, a bright Helles lager with orange blossom and also releasing a refreshed Samuel Adams Rebel IPA, featuring a new packaging design and a new recipe with experimental hops that create a more tropical and piney IPA. We are also executing the national rollout of Rebel Juiced IPA in bottles and cans in the first quarter of 2017 to complement the national draft release in the fourth quarter of 2016. We believe that the history, authenticity and quality of the Samuel Adams brand, our unique beers, and our ability and willingness to continue to invest behind our brand position us well for future growth and we are committed to improving our current trends."....

...Martin Roper, the Company's President and CEO stated, "Fourth quarter depletions trends were driven by a decline in Samuel Adams, largely due to increased competition in the craft beer category, and by declines in Angry Orchard, mainly due to general weakness in the cider category. Partially offsetting these declines were the growth of Twisted Tea, which continues to grow distribution and pull, and the impact of the launch of Truly Spiked & Sparkling, which established itself as a leader in the emerging segment of hard sparkling water. During the quarter we also saw some early benefits of our cost savings initiatives. Thus far in 2017, we are seeing particular weakness in our Samuel Adams seasonal depletion trends due to the slow pull of our new seasonal beer, Samuel Adams Hopscape, which we believe is primarily due to executional misses, with the additional impact of the greater number of new options available to our drinkers at retail and general weakness in the seasonal sub-category. We are taking our learnings from Hopscape and applying them to our planned seasonal transitions to Fresh as Helles and then to Summer Ale in the second quarter. We like our new Samuel Adams packaging and our media advertising message, 'Pursue Better' and our plans for the summer. Angry Orchard and cider trends year to date are similar to the declines we saw in 2016. We are prioritizing returning the cider category and Angry Orchard to growth with a new media campaign and the first quarter national launch of Angry Orchard Easy Apple, an unfiltered refreshing hard cider that was well received in limited test markets last fall."


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