We have covered our short position in Boston Beer (NYSE:SAM) based on near-term data points and the fact that analyst consensus estimates appear too low for Q3 and 2017 overall. While we remain skeptical that Boston Beer can turn its struggling beer and cider brands around in the competitive craft beer and cider environment, we are moving to the sidelines as another positive earnings surprise may be in store for Q3. Note this runs counter to our analysis from a month ago in which we believed Boston Beer’s sales trends might worsen after a better than expected Q2.

After a positive earnings surprise in Q2 ($2.42 EPS before one-time items versus consensus of $1.44), we expected analysts might revise their estimates up significantly to reflect the higher than expected gross margin (54.1%) if not the slightly better than expected beverage shipments (essentially flat albeit possibly helped by the July 4 calendar effect).

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