The Milwaukee Brewers signed young righty Freddy Peralta to a five year contract extension on Wednesday, in what could be an excellent move.
Coming off a down 2019 season, Freddy Peralta wasn’t a typical contract extension candidate. He struggled in the Brewers rotation, was moved to the bullpen, and finished the year with a 5.29 ERA and 1.46 WHIP.
But those numbers really don’t show the talent that Peralta possesses. His fastball velocity increased, his strikeout rates remained high at 12.2 K/9, and he just added a slider to his arsenal this offseason.
Peralta is trending up and the Brewers are buying stock in the young right hander’s future while the price is low. For five years, Peralta will get a guaranteed $15.5MM total, with the potential to go over $30MM total if the two club options at the end of the deal are exercised, bringing the total to a seven year contract.
With only 1.09 years of MLB service time, Peralta was two years away from reaching arbitration, and would’ve reached free agency after the 2024 season. Now, Peralta is guaranteed through 2024, with the pair of club options covering his first two free agent years. So the guarantee for Peralta isn’t extended beyond when he would’ve been a free agent to begin with, but the club options give the team the choice to keep him beyond those five years. At the latest, Peralta can become a free agent as a 30 year old.
Salary is a steal
Peralta was a perfect buy-low extension candidate. While players like Brandon Woodruff and Keston Hiura are coming off strong seasons and it could make sense to extend them before their price gets too high and get a team-friendly deal, Peralta’s contract could be the friendliest to the team of anyone.
One more note on Freddy Peralta: He’s made the team. TBD whether he’s in the rotation or the bullpen on Opening Day, but he will be in the big leagues.
— Adam McCalvy (@AdamMcCalvy) February 26, 2020
This contract assures Peralta of a spot on the big league roster and he’ll likely avoid minor league assignments in the future. But the big question with Peralta is whether he’ll fit in the rotation or the bullpen.
Peralta’s floor is an effective reliever out of the bullpen, bringing electricity and the ability to go multiple innings in the back end of the bullpen in big innings. In that role, a $3.1MM AAV, is a solid contract that won’t no one will bat an eye over. Since he’s unproven, the Brewers can make the case that he’s worth that kind of salary at the moment.
At the same time, the Brewers know of Peralta’s immense potential, and that he could be worth much, much more than that. If Peralta does succeed in the rotation and reaches his ceiling of a No. 2 starter, this kind of contract is an absolute steal. A pitcher that can help front the rotation for years to come at just an average of over $3 million a year? That’s so team-friendly it’s almost unfair.
Why Would Peralta Sign?
If it’s such a team friendly deal, why wouldn’t Peralta hold off on an extension? Why not wait until he can get more money as he establishes himself in the big leagues?
It’s a solid deal for Peralta as he starts getting paid earlier than he would have been waiting for arbitration another two years. Peralta signed with the Mariners as a 16 year old international free agent back in 2014 for a $137K bonus. While the money he’s earned so far in his career is a lot of money to most of us, in baseball terms, he really hasn’t raked in the dough yet, with total career earnings less than one million dollars. For him, he gets that payday now, instead of later.
For Peralta, that kind of payday was too enticing to wait any longer.
This is a great deal for the Brewers, especially if Peralta reaches his full potential. By signing him to an extension, the Brewers are showing Peralta they believe in him and that could push him to dominate in 2020 and beyond. That kind of belief can really motivate a player.
Locking Up The Core
The Brewers have identified Peralta as a member of their core for the future. This is the first long-term contract extension the Brewers have signed under GM David Stearns since he took over. Chase Anderson signed a modest extension a few years ago, but he wasn’t guaranteed through arbitration, while Peralta is.
Remember Stearns’ early mantra to “acquire, develop, and retain” young talent? Now we’re moving into the retain phase of that.
There could be a few more extensions this spring as the Brewers still have some payroll to play with. Most fans will be pushing for a Christian Yelich extension, and while that could technically happen, it’s likely dependent on whether Yelich wants the new money to start right away, or at the end of his current deal.
Regardless, this is a solid deal for the Brewers, with the chance to be an exceptional move by Stearns. They believe in Peralta and are making the investment in him, with a solid payday if he falls to his floor, but a bargain if he reaches his ceiling.
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It’s almost like if you invest in the stock market. Wait until the price drops low, then buy up the stock that you believe is going to bounce back up. That’s exactly what the Brewers did with Peralta.