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Analyst Blog

On July 1, 2014, we issued an updated research report on Monster Beverage Corporation (MNST - Analyst Report).

On May 08, this leading energy drinks and alternative beverage company reported first quarter fiscal 2014 results. Earnings of 55 cents surpassed the Zacks Consensus Estimate by 12.2% and the prior year quarter earnings by 49% on the back of lower selling and marketing expenses and tax rates.  

Despite missing the Zacks Consensus Estimate by 1.6%, revenues of $536.1 million grew 10.7% year over year on the back of a solid increase in sales of new products like Ultra and Muscle Monster and Monster Original Green energy drink.

The company continued to witness increase in sales and gained market share from markets outside U.S. like United Kingdom, Spain, Germany, South Africa, Japan, Brazil and Chile.

However, Monster’s revenue is being hurt due to cannibalization of sales of existing brands like Absolutely Zero and Lo-Carb by new products such as Ultra and Muscle Monster products.  

Monster Beverage continues to witness several controversies. Monster Beverage energy drinks contain 160 milligrams of caffeine in a 16-ounce can. The Food and Drug Administration is currently investigating the impact of caffeine in food and dietary supplements, which includes Monster Beverage products. Any undesirable changes in regulations will impact the company’s operations.

The company is also incurring higher professional costs related to litigations and regulatory issues. Also, the company faces headwinds from unfavorable currency translations due to its strong presence in international markets in international markets.

Monster Beverage carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Better-ranked stocks in the food industry include The WhiteWave Foods Co. (WWAV - Snapshot Report), Inventure Foods, Inc. (SNAK - Snapshot Report), and Aramark (ARMK - Snapshot Report). While WhiteWave Foods sports a Zacks Rank #1 (Strong Buy), Inventure Foods and Aramark carry a Zacks Rank #2 (Buy).

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