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Monster Beverage's (MNST) Q1 Earnings Lag Estimates, Sales Beat

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Monster Beverage Corporation (MNST - Free Report) reported first-quarter 2021 results, wherein the bottom line lagged the Zacks Consensus Estimate whereas sales surpassed the same. Further, both metrics improved year over year. Results gained from continued strength in its energy drink category, particularly the Monster Energy brand.

Going forward, management doesn’t expect any material impact of the COVID-19 pandemic on the functioning of its co-packers and bottlers/distributors who 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 sourcing its aluminum can requirements from South America and Asia to meet growing demand. However, freight inefficiencies along with higher aluminum can costs remain concerns.

Shares of this Zacks Rank #3 (Hold) company have gained 4.6% in the past three months, outperforming the industry’s 3.6% growth.

Q1 Highlights

Monster Beverage’s earnings of 59 cents per share rose 14.2% year over year but missed the Zacks Consensus Estimate of 61 cents.

Net sales of $1,244 million improved 17.1% year over year and surpassed the Zacks Consensus Estimate of $1,223 million. Also, favorable currency fluctuations contributed $9.3 million to net sales.

During the quarter, the company launched Reign Cherry Limeade, Reign White Gummy Bear, Reign Inferno Watermelon warlord, Monster Ultra Gold in singles and a 4-pack, Monster Green, Low-Carb Monster, Monster Zero Ultra, Monster Ultra Paradise, Rehab Monster Strawberry Lemonade belonging to Rehab Monster brand, Monster Ultra Fiesta, Java Monster Oat Milk as well as Monster Ultra Paradise in Canada. Further, it rolled out the Monster Ultra Paradise, Reign Lilikoi Lychee singles and Reign Orange Dreamsicle, NOS Turbo, Pacific Punch in Mexico; and Mean Green in Honduras, Ultra Watermelon in Puerto Rico. Also, the Ultra Paradise in Aruba; Ultra Rosa made debut in Australia. It also launched the Monster Super Fuel in both Purple Passion and sugar-free flavors in New Zealand; Monster Energy Super Cola in Japan; and Pipeline Punch in Hong Kong and Macau.

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 17.9% year over year to $1.17 billion. The segment’s sales included a positive impact of $9.3 million from favorable 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 5.1% year over year to $67.8 million in the first quarter. Currency headwinds had no significant impact on the segment’s results.

Other: Net sales in the segment, which includes some products of American Fruits & Flavors sold to independent third parties (AFF Third-Party Products), grew 11.8% year over year to $5.7 million.

Costs & Margins

The company’s first-quarter 2021 gross margin contracted 250 basis points (bps) to 57.5% due to higher input costs, geographical sales mix and increased promotions.

Operating expenses grew 10.5% year over year to $300.8 million. As a percentage of sales, operating expenses declined 140 bps to 24.2%. Selling expenses, as a percentage of net sales, decreased 110 bps to 9.2%. Meanwhile, distribution costs, as a percentage of net sales, expanded 70 bps to 4.4%. General and administrative expenses, as a percentage of net sales, contracted 110 bps to 10.6%.

Operating income of $414.1 million grew 13.5% year over year. However, operating margin contracted 110 bps to 33.3% for the reported quarter.

Other Financials

Monster Beverage ended the quarter with cash and cash equivalents of $1,178.9 million and total stockholders' equity of $5,459.4 million.

In the reported quarter, the company did not buy back any shares. As of May 6, 2021, it had $441.5 million remaining under the previously authorized share repurchase plan.

Monster Beverage Corporation Price, Consensus and EPS Surprise

Stocks to Consider

Compania Cervecerias Unidas, S.A. (CCU - Free Report) , a Zacks Rank #1 (Strong Buy) stock, has an expected long-term earnings growth rate of 10.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coca-Cola FEMSA (KOF - Free Report) has a long-term earnings growth rate of 14.1% and currently, a Zacks Rank #2 (Buy).

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