|In a tough economy, the tough get going by stocking up on beer
by Dave Reiner
Wednesday, December 15, 2010
Are consumers drinking away the blues as they try and find jobs that donít exist? It would seem that in this period of extremely high unemployment that people would be saving as much money as they can, forgoing the purchase of luxuries like fancy beer products. However, something is really brewing over at the Boston Beer Company (NYSE:SAM).
The Company stated that it expects 2010 earnings to range between $3.30 and $3.60 per share, up from its previous forecast of $2.85 to $3.15 and also gave a robust profit estimate of $3.95 per share for 2011, versus the average analyst estimate of $3.53. As we can see from the stock chart of the Boston Beer Company, it has been quite a nice performer lately.
Apparently in a tough economy, the tough get going by filling their refrigerators with cases of Sam Adams beer (in addition to heading to Deckers (Nasdaq:DECK) and buying UGG boots and then to Lululemon (Nasdaq: LULU) to buy some yoga tights - both Deckersí and Lululemonís stocks have also been high-flyers lately).
On the flip side, things arenít so rosy over at Best Buy (NYSE:BBY) this week. They announced a huge top line miss of $11.89 billion in Q3 revenue on expectations of $12.45 billion. Ouch. I believe that most retailers will have a very difficult year next year thanks to the effects of QE2. Commodity prices have gone sky-high and this will soon squeeze retail margins as well as the consumer's wallet. Interest rates are rising despite the Federal Reserveís treasury purchases and the stock market is showing some weakness today that may continue to carry through to the end of the year and into the next. So without higher stock prices to make consumers feel all warm and fuzzy inside, they may start to pare back spending. If all we get is a few months of stock gains for $600 billion dollars, you can bet that QE 3 will be much more difficult for the Fed to justify. I think we are in for a bumpy ride next year, and if so, the Boston Beer Company may have to revise its earnings estimates to the upside even more as The Ben Bernanke and the do-nothing politicians drive us all to drink case upon case of Sam Adams beer.