Back to top

Image: Bigstock

Monster Beverage (MNST) Q4 Earnings in Line, Sales Surpass

Read MoreHide Full Article

Monster Beverage Corporation (MNST - Free Report) reported a better-than-expected top line in fourth-quarter 2021, while the bottom line was in line with the Zacks Consensus Estimate. Moreover, sales improved year over year, driven by continued strong demand for the energy drinks category. However, the ongoing supply-chain disruptions and elevated aluminum can costs hurt earnings.

Logistics issues, including shortages of shipping containers and global port congestions, higher input costs, and freight inefficiencies, hurt the gross and operating margins in the fourth quarter. The company could not fully meet the increasing consumer demand in the fourth quarter due to the shortages in aluminum cans and delays in procuring certain ingredients.

Shares of this Zacks Rank #3 (Hold) company have declined 6.8% in the past year against the industry’s 21% growth.


Zacks Investment Research
Image Source: Zacks Investment Research


Q4 Highlights

Monster Beverage’s earnings of 60 cents per share were in line with the Zacks Consensus Estimate but declined 3.2% year over year. The bottom line was impacted by inflationary operational costs for aluminum cans, shipping, freight and other inputs. The company is working to mitigate these costs through measures like reductions in promotions and other pricing actions.

Net sales of $1,425 million improved 19.1% year over year and surpassed the Zacks Consensus Estimate of $1,324 million. Unfavorable currency translations hurt net sales by $2.4 million in the reported quarter.

Net sales to customers outside the United States rose 32% to $508.1 million, representing about 36% of net sales.

Monster Beverage Corporation Price, Consensus and EPS Surprise


Monster Beverage Corporation Price, Consensus and EPS Surprise

Monster Beverage Corporation price-consensus-eps-surprise-chart | Monster Beverage Corporation Quote

Segmental Performance

Monster Energy Drinks: The segment includes Monster Energy drinks, Reign Total Body Fuel high-performance energy drinks and True North Pure Energy Seltzers. The segment’s net sales increased 20.7% year over year to $1.35 billion. The segment’s sales included a negative impact of $2.7 million from adverse currency rates.

Strategic Brands: In addition to the 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 declined 3.5% year over year to $65.6 million in the fourth quarter. Shortages in NOS concentrate hurt the segment’s net sales for the fourth quarter. However, currency tailwinds aided the segment’s sales by $0.3 million.

Other: Net sales for the segment, which includes some products of American Fruits & Flavors sold to independent third-parties (AFF Third-Party Products), declined 10.4% year over year to $6 million.

Costs & Margins

The company’s fourth-quarter 2021 gross margin contracted 380 basis points (bps) to 53.9% because of elevated aluminum can costs due to higher aluminum commodity pricing, increased freight-in costs, adverse geographical and product sales mix, and production inefficiencies.

Monster Beverage procured additional quantities of aluminum cans from suppliers in the United States and abroad, owing to the rising consumer demand. However, it continued to witness shortages in its aluminum can requirements in the United States and EMEA in the fourth quarter. MNST also felt the pinch of higher aluminum can costs due to elevated aluminum commodity pricing and the costs of importing aluminum cans.

Apart from this, the company saw elevated ingredient and other input costs, including shipping and freight, labor, trucking, fuel, co-packing fees, secondary packaging materials, and increased outbound freight costs, which led to increased costs of sales and higher operating costs in the fourth quarter.

Monster Beverage also experienced incremental supply-chain challenges related to freight inefficiencies, trucking availability, shortages of shipping containers, port of entry congestion, insufficient co-packing capacity, and delays in receiving certain ingredients. This led to product shortages in these regions amid the strong demand.

Operating expenses grew 23% year over year to $354.7 million. The increase can be attributed to higher outbound freight and warehouse costs; elevated sponsorship and endorsement expenses; increased marketing expenses, including social media and digital marketing; and higher payroll costs.

As a percentage of sales, operating expenses increased 80 bps to 24.9%. Higher operating expense rates mainly resulted from increased selling and distribution expenses. Selling expenses, as a percentage of net sales, rose 10 bps to 9.8%. Distribution costs, as a percentage of net sales, increased 100 bps to 4.9%. However, general and administrative expenses, as a percentage of net sales, declined 30 bps year over year to 10.1%.

Operating income of $412.9 million grew 2.6% year over year. However, the operating margin contracted 460 bps to 29% for the reported quarter.

Other Financials

Monster Beverage ended 2021 with cash and cash equivalents of $1,326.5 million, and total stockholders' equity of $6,567 million. Short-term investments as of Dec 31, 2021, were $1,749.7 million, whereas long-term investments were $99.4 million.

In the reported quarter, the company did not buy back any shares. As of Feb 24, 2022, it had $441.5 million remaining under the previously authorized share repurchase plan.

Better-Ranked Stocks to Consider

We have highlighted three better-ranked stocks in the Consumer Staples sector, namely Fomento Economico Mexicano (FMX - Free Report) , Coca-Cola and Diageo (DEO - Free Report) .

Fomento Economico Mexicano, alias FEMSA, has exposure in various industries, including beverage, beer and retail, which gives it an edge over its competitors. It currently sports a Zacks Rank #1 (Strong Buy). FMX has a trailing four-quarter earnings surprise of 51.2%, on average. Shares of FMX have rallied 10.9% in the past year.

You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FEMSA’s current financial-year sales suggests growth of 17.4% from the year-ago period's reported figures. FMX has an expected EPS growth rate of 14.8% for three-five years.

Coca-Cola, which is a global beverage giant, currently has a Zacks Rank #2 (Buy). The company has an expected EPS growth rate of 8% for three-five years. Shares of KO have improved 23.2% in the past year.

The Zacks Consensus Estimate for Coca-Cola's current financial-year sales and earnings per share suggests growth of 8.7% and 6%, respectively, from the year-ago period. KO has a trailing four-quarter earnings surprise of 13.5%, on average.

Diageo, involved in producing, distilling, brewing, bottling, packaging and distributing spirits, wine and beer, currently has a Zacks Rank #2. Shares of DEO have rallied 22.4% in the past year.

The Zacks Consensus Estimate for Diageo’s current financial-year sales and earnings per share suggests growth of 32.1% and 15.9%, respectively, from the year-ago period’s reported figures. DEO has an expected EPS growth rate of 9.2% for three-five years.