This week’s Stock of the Week is a small player in a huge industry. But it has just joined forces with one of the largest companies in the business…read more below.

Brewing Profits

Craft Brew Alliance Inc. (BREW) gives investors entry into one of the fastest-growing segments of the beer business—craft beer brewing.

Anheuser Busch, which owns about one-third of the company’s total shares, recently signed a distribution agreement with Craft Brew extending through 2028. The agreement eliminates some previously planned price step-ups in Craft Brew’s distribution costs and should help it distribute its products more efficiently overseas. It also moves some of Craft Brew’s brewing capacity to Anheuser Busch’s large, state-of-the-art facilities. Craft Brew’s brands include Kona, Widmer Brothers, Redhook, Omission and Square Mile.

Craft Brew’s margins could come under pressure because there are so many microbreweries operating in the US, but its connection with a major international firm gives it a big advantage. Revenue of $204 million in 2015 should grow to $216 million this year and $231 million in 2017.

Earnings per share: 2017 est./$0.52… 2016 est./$0.26… 2015/$0.12.

This Week’s Expert

perkins_dan-4cDaniel S. Perkins is executive vice president of Perkins Capital Management, Wayzata, Minnesota, which manages $130 million, and co-portfolio manager of the $7 million Perkins Discovery Fund (PDFDX). PerkinsCapital.com