) -- Sam Adams maker

Boston Beer

(SAM) - Get Report

surged to an all-time high Wednesday after the brewer raised its outlook for 2010 profits.

Boston Beer said it expects to book earnings per share in a range of $3.30 to $3.60 for fiscal 2010. That's up from its prior guidance for full-year EPS in a range of $2.85 to $3.15.

Boston Beer shares surged 12.9% to an all-time high of $96.67, before paring back somewhat to trade at $95.66 Wednesday afternoon.

The craft brewer said its upwardly revised outlook primarily reflects increased shipment volumes and the timing of certain operating costs.

Year-to-date shipments and orders point to year-over-year growth of 12%, the company said.

Boston Beer's updated outlook tops Wall Street's consensus call for 2010 EPS of $3.21.

Morningstar raised its guidance on Boston Beer following the company's improved forecast, saying it now expects the beer maker to book $3.89 per share in fiscal 2010.

"Although the rebound in demand for Sam Adams appears to be outstripping the broader economic recovery and our previous forecasts, our investment thesis remains intact that the large brewers have the ability to pressure Boston Beer's pricing power," the equity research firm noted. "We continue to believe that the market is extrapolating current growth rates over too long a period and that the stock is overvalued."

Morningstar had been expecting a strong year-end showing from Boston Beer, and had previously forecast double-digit volume growth. It raised its EPS estimate, saying it now sees low-double-digit volume growth in 2011 on strong demand for craft beer and low-single-digit price increases.

The firm forecast Boston Beer's operating margin to come in at 15% as operating leverage from higher volumes offsets the brewer's shift in costs to the first quarter of fiscal 2011.

"However, we think rising input costs will make it difficult for Boston Beer to achieve its earnings per share target next year, and our estimate falls just short of guidance," Morningstar senior equity analyst Philip Gorham noted.

>>18 Overbought Stocks to Sell Now

Gorham maintained that

Boston Beer shares are overvalued.

He sees demand for higher-quality beer growing as unemployment eases and consumer confidence picks up, but said the massive scale of larger beer makers like




Anheuser-Busch InBev

(BUD) - Get Report

give them the edge in price competitiveness and cost efficiencies.

"Their ability to manipulate the price premium of craft beers over mainstream beers, together with an influx of new

small craft beer brands from both large and small brewers, is likely to hinder growth in the longer term," Gorham wrote. "Therefore, we forecast growth to decline to its long-term rate of 3% by the end of our 10-year explicit forecast period."

For value investing in the beer sector, Gorham tapped

Molson Coors

(TAP) - Get Report

as his top pick.

"With the stock trading at just 11 times our estimate of 2011 earnings, we think the market is missing the value of the joint venture with SABMiller, which is allowing the firm to restructure its manufacturing and distribution footprint and cut as much as $315 million in annual operating costs."

Molson shares added 1.8% Wednesday afternoon. Anheuser-Busch lost 1.2%, while American depositary receipts of SABMiller fell 0.3%.

-- Written by Miriam Marcus Reimer in New York.

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