Monster Beverage

Company Description

Monster Beverage makes alternative beverage category beverages. The company's Direct Store Delivery segment offers carbonated energy drinks, non-carbonated dairy based coffee plus energy drinks and ready-to-drink iced teas. This segment sells its products through a distributor network. The company was formerly known as Hansen Natural Corporation and changed its name to Monster Beverage Corporation in January 2012. Monster Beverage Corporation was founded in 1985 and is based in Corona, California.

Monster Beverage Meets or Beats Estimates in Five of Last Seven Quarters

Monster Beverage has met or topped the Zacks Consensus Estimate in five of the last seven quarters. The four beats have come in on average more than $0.03 higher than the Zacks Consensus Estimate. Those three cents translate into positive earnings surprises of more than 9.5%. The stock has generally reacted positively when the company beats expectations. The stock was up 3.2% on average following the four beats.

The second largest price movement in the stock came the day after the company met estimates. The September 2011 quarter saw the company beat the topline estimate of $461 million by posting revenues of $475 million. EPS was in line with the Zacks Consensus Estimate and the stock moved higher by 8.3%.

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Monster Beverage Most Recent Reported Earnings

On May 9, 2012 Monster Beverage reported revenue of $455 million, approximately $8 million higher than the Zacks Consensus Estimate and up from $356 million reported in year ago quarter, an increase of 28%. In addition, earnings per share came in at $0.41, $0.03 higher than the Zacks Consensus Estimate of $0.38. The beat of 7.9% helped lift the stock higher by 8.6% in the session following the release.

Monster Beverage Sees Estimates Moving Higher

Monster Beverage has seen earnings estimates move higher following the recent positive earnings surprise. The Zacks Consensus Estimate for 2012 was as low as $1.85 in December 2011 and has since moved to $2.03. That represents an increase of more than 9.7%.

Estimates for 2013 have also seen an increase following the most recent quarterly release. The Zacks Consensus Estimate for 2013 stood at $2.21 and has since moved to $2.41. The increase of 12% for 2013 is part of the key driver for the stock. Better than the 12% increase in 2013 earnings expectations is the 22% implied growth rate for earnings from 2012 to 2013. That is the type of growth that aggressive growth investors look for.

Valuation

The valuation for Monster Beverage can be summed up as double the industry average. The trailing twelve months PE multiple of 43x is more than double the 19x industry average. The forward PE sports a similar premium at a 35x multiple compared to a 17x industry average. Price to book is 11.5x compared to 5.2x industry average and the price to sales multiple is 6.9x, more than double the 3x industry average. The "double" the industry average is justified, in that MNST has grown revenue by 28% on year over year basis while the industry average is a mere 5.4%. EPE growth of 39% is also well above the industry average of negative 4.6%. Multiples of a growth stock are generally on the high side for good reason, and MNST supports its high multiples with growth.

The Chart

A quick look at the price and consensus chart shows a stock that has done nothing by move higher. Earnings estimates have also pretty much continuously moved higher, but the stock is well above the earnings lines implying a rich valuation. The multiples for this stock are on the high side for good reason, and MNST supports its high multiples with revenue and earnings growth. Monster Beverage has moved to a Zacks #1 Rank (Strong Buy) as of May 11, 2012.

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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