Craft Brew (BREW) Post Earnings Update

Steve Kanaval  |

I did a beverage sector piece on Craft Brew Alliance (BREW) back in August picking a few Emerging Growth stocks where I broke down the good and the bad for stocks in the beverage sector. I highlighted a few points revolving around the new CFO, and the expansion and bringing online the Kona brand which should come out in 2018. Below is what our Research Team at Equities said in a previous report (click here for full article):

The new CFO, Joe Vanderstelt, is a Coors guy who watched the company go through an acquisition, but his skills are in making and integrating acquisitions. I expect this to continue, with BREW swapping shares for small brewers and tacking on some revenue. I also see the Kona brand expansion coming online, and I do not see this built into the stock. The recent sell-off back to the $10 level is critical to watch. Expect these levels to hold and get a bounce back to $12. This stock is worth revisiting once the new CFO gets settled and sales are out for the new Hawaiian facility.

Below is a chart showing the Q4 sell off and some sideways action to start 2016

Some recent notes from the conference call talking about guidance and margins point to reiterating the 2017 35% guidance number and talking about Kona coming on line in 2018. (Click here for a full transcript of the recent conference call). below is quick excerpt fro the COO Scott Mennen taking a call from the Raymond James analyst.

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Thanks for taking the questions. Congrats on the progress so far. I had a question on -- you're reiterating the 35% gross margin for 2017. And, of course, that's before the Kona Brewery comes online. Can you speak to kind of how that's going to help things at that point?

Scott Mennen, Craft Brew Alliance Inc. - Operating Officer

"Yes. So we're guiding still at 35% in 2017. The Kona Brewery will come on in '18. And so we'll begin to see benefits on that as that brewery comes on as we're able to brew beer closer to our consumers. So the 35%, the way we got it laid out is -- going back again is -- contemplates that brewery not coming on until 2018.

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Shares did not really react to the call as the stock moved sideways. It seems the company is dealing with some changes and absorbing those changes fairly well. The have moved up from the 4th Quarter lows and look to be on the road to recovery. This is a group of highly skilled beverage executives in a competitive market who are attempting to set the ship right. The stock price has actually been a good reflection of what has been going on behind the scenes at Craft Brew Alliance (BREW)...

We look forward to continuing our reporting on the happenings at the company, personally I cannot live without Red Hook, so I am a bit biased..


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Companies

Symbol Name Price Change % Volume
BREW Craft Brew Alliance Inc. 16.23 8.90 121.42 5,022,413 Trade

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