See Why This Beer Stock is Getting Trashed Now

Sobering up is tough. Last night craft brewer Boston Beer Company (NYSE:SAM) turned on the lights after a long two years of partying … and the beer goggles are off.

Earnings for the maker of Sam Adams beer were awesome, but they missed Wall Street expectations and gave some worrisome guidance. That’s not how to play the stock price inflation game.

Founder Jim Koch said, “[W]e continue to see expanded distribution of domestic specialty brands and local craft brands, which is increasing competition in the category.” This will have analysts worrying whether SAM’s domination will soon be watered down.

As for the numbers, analysts were expecting $0.90 cents a share, but the company delivered $0.87 cents a share. On a positive front, Boston Beer Company (NYSE:SAM) increased revenues to $126.3 million from $117.5 million last year, beating revenue estimates of $118.5 million.

However, the focus is clearing on rising operating costs — and these costs should continue to rise if Kock et al plan to increase marketing against increasing competition. Like everyone else, the company is also concerned about rising commodity prices affecting input costs.

CEO Martin Roper, summed up the bad news:

“We believe we performed well in the fourth quarter and that the business continues to be healthy and may be responding to our increased investments in our brand.  As we look forward to 2011, we expect to augment our sales force and brand support levels further to address the increasing competitive activity and to grow our brands appropriately given the opportunities we see.  It is possible that these decisions might result in slower earnings growth in 2011, as we may forsake some earnings in the short term in order to build our organizational capabilities and support our brands at appropriate levels.  Our 2011 earnings may also be negatively affected by the systems costs associated with expanding our Freshest Beer Program.  We are currently planning that 2011 depletions growth will be approximately 9%, which is slightly lower than 2010 trends.”

Shares of Boston Beer Company (NYSE:SAM) have jumped from $19.02 to $97.91 in two short years. So, today’s sell off over 6% is not too much of a surprise given managements warnings. Maybe the summer music festival season will surprise to the upside in quarters to come.