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Boston Beer on Target

But it warns that margins will be hit.

Boston Beer (SAM) - Get Boston Beer Company, Inc. Class A Report beat third-quarter targets but said it expects margins to slip for the year.

The Boston-based brewer made $5.9 million, or 41 cents a share, for the quarter ended Sept. 30, up from the year-ago $4.2 million, or 29 cents a share. Revenue rose to $76 million from $73 million a year earlier.

Analysts surveyed by Thomson Financial were looking for a 33-cent profit on sales of $74 million.

Boston Beer guided to full-year earnings of $1.16 to $1.26 a share, in line with the $1.21 Wall Street estimate, but said gross margin would drop 2 percentage points from a year ago.

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The company also said it continues to consider its options for expanding capacity in the light of Miller's decision to drop it as a brewery customer.

"We have revised upward our capacity needs in New England based on healthy Craft category growth, our own growth trends, and higher freight costs, and are now exploring production capacity in excess of 1.0 million barrels of Samuel Adams brand products and Twisted Tea," Boston Beer said. "After further considering our estimated capacity needs, along with more detailed site construction estimates, it now appears that construction of the facility and all equipment costs could be between $130 million and $170 million.

"In addition, the land acquisition costs, other site specific costs and other startup costs could be between $25 million and $40 million. The cost of the project will ultimately depend on the final specifications, including, but not limited to, initial capacity and capabilities, expansion potential and site specific costs. We are evaluating this potential investment in brewery ownership along with other supply strategies to determine which investments are appropriate for the Company, given the growth of the Craft beer category and known and unknown risks in supply-chain alternatives."

Shares fell $1.55 to $35.22 ahead of the report.