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Shares of Monster Beverage Corporation (MNST - Free Report) dipped 1.1% in the after-market trading session on Nov 5, despite better-than-expected third-quarter 2020 results. Despite adverse impacts of the ongoing COVID-19 pandemic, earnings and sales improved on a year-over-year basis.
Going forward, management doesn’t foresee any material impact of the COVID-19 pandemic on the functioning of its co-packers and bottlers/distributors that manufacture and distribute products, respectively. Moreover, Monster Beverage’s supply chain remains unaffected, with no major impact on raw material and finished product shortages. The company is also continually managing its aluminum can requirements to meet the growth in volume, despite the current industry-wide supply constraints for aluminum cans.
However, the company expects the pandemic-related impacts to be a heightened threat in a number of countries, including EMEA, as these are reinstituting lockdowns and other restrictions due to a second COVID-19 wave.
Shares of this Zacks Rank #3 (Hold) company have gained 31.7% year to date against the industry’s 8% decline.
Q3 Highlights
Monster Beverage’s earnings of 65 cents per share rose 19.6% year over year and outpaced the Zacks Consensus Estimate of 63 cents.
Net sales of $1,246.4 million improved 9.9% year over year and surpassed the Zacks Consensus Estimate of $1,239.4 million. Moreover, gross sales (net of discounts and returns) advanced 11.1% from the prior-year quarter to $1,464.4 million. Also, unfavorable currency fluctuations weighed on net and gross sales by $12.5 million and $11.9 million, respectively. Despite persistent adverse impacts of the COVID-19 pandemic, the company’s third-quarter 2020 sales marked the highest quarterly sales ever recorded and record sales for the third quarter.
The top-line growth was aided by increased at-home consumption trends owing to a shift in consumer preferences for shopping channel and packaging options. Notably, the company witnessed robust sales trends across e-commerce, club store, mass merchandiser and grocery and related businesses. Further, foot traffic at its largest convenience and gas channel has been witnessing improved trends since the latter half of second-quarter 2020, which continued throughout the third quarter. However, the food service on-premise channel, which forms small part of the company’s business, remained affected during the quarter.
Monster Beverage Corporation Price, Consensus and EPS Surprise
Although the EMEA region reflected significant impacts of the pandemic, it reported sequential net sales growth for both Monster Energy and Strategic Brands segments. Moreover, the company’s supply chain remains unaffected, leading to uninterrupted services to customers.
During the quarter and through early October, it launched many Monster Energy brand energy drinks, Reign Total Body Fuel high-performance energy drinks, and affordable energy brands in several domestic as well as international markets.
Segmental Performance
Monster Energy Drinks: The segment primarily includes brands like Monster Energy drinks and Reign Total Body Fuel high performance energy drinks. The segment’s net sales increased 9.6% year over year to $1.16 billion. The segment’s sales included a negative impact of $11.6 million from unfavorable currency rates.
Strategic Brands: In addition to affordable energy drink brands, the segment includes a range of energy drink brands acquired from The Coca-Cola Company (KO - Free Report) . The segment’s net sales improved 12% year over year to $74.3 million for the third quarter. Currency headwinds marred the segment’s results by $0.9 million.
Other: Net sales in the segment, which includes some products of American Fruits & Flavors sold to independent third parties (AFF Third-Party Products), grew 45.8% year over year to $8.6 million.
Costs & Margins
The company’s third-quarter 2020 gross margin contracted 30 basis points (bps) to 59.1%. Operating expense inched up 0.1% year over year to $277.9 million. As a percentage of sales, operating expense declined 220 bps to 22.3%, driven by reduced costs related to sponsorship and endorsements, as well as lower travel and entertainment costs as a result of the ongoing pandemic. Selling expenses, as a percentage of net sales, decreased 230 bps to 8.8%. Meanwhile, distribution costs, as a percentage of net sales, expanded 20 bps to 3.5%. General and administrative expenses, as a percentage of net sales, remained flat at 10.1%.
Operating income of $458.6 million grew nearly 16% year over year. Moreover, operating margin expanded 190 bps to 36.8% for the reported quarter.
Other Financials
Monster Beverage ended the third quarter with cash and cash equivalents of $1,074.7 million, and total stockholders' equity of $4,629.3 million.
In the reported quarter, the company did not buyback any shares. As of Nov 5, 2020, it had $441.5 million remaining under the previously authorized share repurchase plan.
Molson Coors Beverage Company (TAP - Free Report) has a long-term earnings growth rate of 3.7% and currently holds a Zacks Rank #2 (Buy).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Monster Beverage (MNST) Dips Despite Q3 Earnings & Sales Beat
Shares of Monster Beverage Corporation (MNST - Free Report) dipped 1.1% in the after-market trading session on Nov 5, despite better-than-expected third-quarter 2020 results. Despite adverse impacts of the ongoing COVID-19 pandemic, earnings and sales improved on a year-over-year basis.
Going forward, management doesn’t foresee any material impact of the COVID-19 pandemic on the functioning of its co-packers and bottlers/distributors that manufacture and distribute products, respectively. Moreover, Monster Beverage’s supply chain remains unaffected, with no major impact on raw material and finished product shortages. The company is also continually managing its aluminum can requirements to meet the growth in volume, despite the current industry-wide supply constraints for aluminum cans.
However, the company expects the pandemic-related impacts to be a heightened threat in a number of countries, including EMEA, as these are reinstituting lockdowns and other restrictions due to a second COVID-19 wave.
Shares of this Zacks Rank #3 (Hold) company have gained 31.7% year to date against the industry’s 8% decline.
Q3 Highlights
Monster Beverage’s earnings of 65 cents per share rose 19.6% year over year and outpaced the Zacks Consensus Estimate of 63 cents.
Net sales of $1,246.4 million improved 9.9% year over year and surpassed the Zacks Consensus Estimate of $1,239.4 million. Moreover, gross sales (net of discounts and returns) advanced 11.1% from the prior-year quarter to $1,464.4 million. Also, unfavorable currency fluctuations weighed on net and gross sales by $12.5 million and $11.9 million, respectively. Despite persistent adverse impacts of the COVID-19 pandemic, the company’s third-quarter 2020 sales marked the highest quarterly sales ever recorded and record sales for the third quarter.
The top-line growth was aided by increased at-home consumption trends owing to a shift in consumer preferences for shopping channel and packaging options. Notably, the company witnessed robust sales trends across e-commerce, club store, mass merchandiser and grocery and related businesses. Further, foot traffic at its largest convenience and gas channel has been witnessing improved trends since the latter half of second-quarter 2020, which continued throughout the third quarter. However, the food service on-premise channel, which forms small part of the company’s business, remained affected during the quarter.
Monster Beverage Corporation Price, Consensus and EPS Surprise
Monster Beverage Corporation price-consensus-eps-surprise-chart | Monster Beverage Corporation Quote
Although the EMEA region reflected significant impacts of the pandemic, it reported sequential net sales growth for both Monster Energy and Strategic Brands segments. Moreover, the company’s supply chain remains unaffected, leading to uninterrupted services to customers.
During the quarter and through early October, it launched many Monster Energy brand energy drinks, Reign Total Body Fuel high-performance energy drinks, and affordable energy brands in several domestic as well as international markets.
Segmental Performance
Monster Energy Drinks: The segment primarily includes brands like Monster Energy drinks and Reign Total Body Fuel high performance energy drinks. The segment’s net sales increased 9.6% year over year to $1.16 billion. The segment’s sales included a negative impact of $11.6 million from unfavorable currency rates.
Strategic Brands: In addition to affordable energy drink brands, the segment includes a range of energy drink brands acquired from The Coca-Cola Company (KO - Free Report) . The segment’s net sales improved 12% year over year to $74.3 million for the third quarter. Currency headwinds marred the segment’s results by $0.9 million.
Other: Net sales in the segment, which includes some products of American Fruits & Flavors sold to independent third parties (AFF Third-Party Products), grew 45.8% year over year to $8.6 million.
Costs & Margins
The company’s third-quarter 2020 gross margin contracted 30 basis points (bps) to 59.1%. Operating expense inched up 0.1% year over year to $277.9 million. As a percentage of sales, operating expense declined 220 bps to 22.3%, driven by reduced costs related to sponsorship and endorsements, as well as lower travel and entertainment costs as a result of the ongoing pandemic. Selling expenses, as a percentage of net sales, decreased 230 bps to 8.8%. Meanwhile, distribution costs, as a percentage of net sales, expanded 20 bps to 3.5%. General and administrative expenses, as a percentage of net sales, remained flat at 10.1%.
Operating income of $458.6 million grew nearly 16% year over year. Moreover, operating margin expanded 190 bps to 36.8% for the reported quarter.
Other Financials
Monster Beverage ended the third quarter with cash and cash equivalents of $1,074.7 million, and total stockholders' equity of $4,629.3 million.
In the reported quarter, the company did not buyback any shares. As of Nov 5, 2020, it had $441.5 million remaining under the previously authorized share repurchase plan.
Stocks to Consider
National Beverage Corp. (FIZZ - Free Report) delivered an earnings surprise of 26.6%, on average, in the trailing four quarters. It flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Molson Coors Beverage Company (TAP - Free Report) has a long-term earnings growth rate of 3.7% and currently holds a Zacks Rank #2 (Buy).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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