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Why Monster Beverage (MNST) Marched Ahead of Its Industry
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Monster Beverage Corporation (MNST - Free Report) has been gaining from the continued momentum in the energy drinks category, as well as product innovation plans. It is on track with price increases to wean the ongoing cost pressures. This led to sales growth of 15.2% and 20.2% on a reported and currency-adjusted basis in third-quarter 2022.
Shares of this Zacks Rank #3 (Hold) company gained 15.7% in the past three months, outperforming the industry’s growth of 11.2%.
Let’s delve deeper
Factors Narrating MNST’s Growth Story
Monster Beverage has been witnessing continued strength in its energy drinks category for a long time. In third-quarter 2022, the Monster Energy Drinks segment's net sales advanced 13% year over year to $1.5 billion. On a currency-adjusted basis, net sales for the segment rose 18%. Sales for the company's energy brands, including Reign, rose 2.9% in the 13-week period ended Oct 22, 2022. Sales for the Monster brand improved 11.2% year over year in the quarter.
Image Source: Zacks Investment Research
Management is optimistic about strength in the global energy drinks category. It is poised to gain from growth in the Monster Energy family of brands, and strength in Strategic and Affordable energy brands.
The company remains committed to product launches and innovation to boost growth. In third-quarter 2022, the company launched many products and expanded distribution in international markets. In the quarter, it launched Predator in Kazakhstan, Malaysia and Jordan, along with the continued rollout of Predator in India.
Consequently, MNST intends to introduce the Predator brand in additional countries in APAC in the last quarter of 2022 and the first half of 2023.
The company launched Monster Super Cola in a can in Japan in August and Monster Rehab Tea Plus Lemonade in October. In EMEA, it launched Monster Assault and Monster Reserve White Pineapple in certain countries. Also, MNST introduced Juiced Monarch, Juiced Chaotic, Ultra Rosa and Ultra Watermelon in a few countries.
The company launched additional SKUs of Burn, Predator and Rain in certain countries in the said quarter. In July, it introduced its first 16-ounce 12-pack ultra-variety packs in Puerto Rico. In August, the company launched Monster Reserve Watermelon and Reserve White Pineapple.
Monster Dragon Tea Lemon was launched in Honduras and El Salvador in August, while the same was launched in Guatemala in September. Monster Juice Monarch was launched in August. Its juice portfolio witnessed an expansion in Mexico in August. In Australia, the company expanded its Mother portfolio and launched Mother Lava Guava.
The company is on track to launch Monster Energy Zero Sugar in fourth-quarter 2022, initially in the United States. Monster Energy Zero Sugar is developed to provide a zero-sugar variant of its original Monster Energy Green flavor.
MNST revealed plans to launch pure unflavored water namely, Monster Tour Water, in the United States, in still and sparkling variants, in the first half of 2023. The company intends to launch Rainstorm in 4 flavors in the first half of 2023. Also, Monster Energy Lewis Hamilton Zero Sugar Energy Drink is likely to enter select EMEA markets in the fourth quarter of 2022, with a rollout to 20 additional markets in the first quarter of 2023.
The company remained optimistic about the launch of its first flavored malt beverage alcohol product, known as ‘The Beast Unleashed.’ Gains from the CANarchy acquisition, and a robust line-up of product launches for both alcoholic and non-alcoholic drinks make it well-placed for long-term growth.
MNST has been making efforts to overcome supply-chain challenges. Some of the notable actions taken to navigate through the challenges are decreasing its reliance on imported cans. The company is purchasing aluminum cans from local sources in the United States and EMEA. MNST also rebuilt and increased finished product inventory levels across the United States and EMEA to reduce the excessive cost of long-distance freight to meet consumer demand. It is returning to its orbit strategy of producing closer to customers.
Meanwhile, Monster Beverage is implementing pricing actions to overcome the ongoing cost pressures. In third-quarter 2022, the company was on track with the mitigation of higher production and distribution costs through pricing actions and lowered promotional expenses. It implemented price increases for its products in the United States on Sep 1, 2022. It also brought effective price increases in certain international markets in the third quarter.
Headwinds to Overcome
However, the company continues to grapple with inflationary operational costs for aluminum cans, shipping, freight and other inputs. This, along with elevated ingredients and other input costs, comprising secondary packaging materials and increased co-packing fees, hurt the margins. The company’s third-quarter 2022 gross margin contracted 460 basis points (bps) to 51.3%.
Operating expenses grew 20.6% year over year to $415.8 million due to higher warehousing and other logistical expenses, elevated payroll expenses, increased selling and marketing expenses, and increased general and administrative expenses. Also, operating income of $417.9 million declined 6% year over year, driven by a decrease in the gross margin, as well as higher operating expenses. The operating margin contracted 580 bps to 25.7% in the reported quarter. Consequently, third-quarter fiscal 2023 earnings of 60 cents per share declined 3.9% year over year.
Conclusion
Monster Beverages appears to be in good shape despite the industry challenges, driven by the introduction of innovative products across the Monster family to suit consumers’ needs as well as strength in its energy drinks category. Topping it, a long-term earnings growth rate of 11.4% raises optimism about the stock. Also, the Zacks Consensus Estimate for 2022 earnings has moved up 0.9% in the past 60 days.
Coca-Cola FEMSA currently flaunts a Zacks Rank #1 (Strong Buy). KOF has a trailing four-quarter earnings surprise of 26% on average. It has a long-term earnings growth rate of 10.3%. The stock has gained 7.7% in the past three months.
The Zacks Consensus Estimate for Coca-Cola FEMSA’s current financial-year sales and earnings per share suggests growth of 15.6% and 6.2%, respectively, from the year-ago reported numbers. The consensus mark for KOF’s earnings per share has moved up 9.8% in the past seven days.
e.l.f. Beauty currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of 77%, on average. The stock has rallied 29% in the past three months.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings suggests growth of 17.6% and 8.3%, respectively, from the prior-year reported numbers. The consensus mark for ELF’s earnings per share has moved up a penny in the past seven days.
Conagra Brands, a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8% on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year’s sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the year-ago reported figures.
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Why Monster Beverage (MNST) Marched Ahead of Its Industry
Monster Beverage Corporation (MNST - Free Report) has been gaining from the continued momentum in the energy drinks category, as well as product innovation plans. It is on track with price increases to wean the ongoing cost pressures. This led to sales growth of 15.2% and 20.2% on a reported and currency-adjusted basis in third-quarter 2022.
Shares of this Zacks Rank #3 (Hold) company gained 15.7% in the past three months, outperforming the industry’s growth of 11.2%.
Let’s delve deeper
Factors Narrating MNST’s Growth Story
Monster Beverage has been witnessing continued strength in its energy drinks category for a long time. In third-quarter 2022, the Monster Energy Drinks segment's net sales advanced 13% year over year to $1.5 billion. On a currency-adjusted basis, net sales for the segment rose 18%. Sales for the company's energy brands, including Reign, rose 2.9% in the 13-week period ended Oct 22, 2022. Sales for the Monster brand improved 11.2% year over year in the quarter.
Image Source: Zacks Investment Research
Management is optimistic about strength in the global energy drinks category. It is poised to gain from growth in the Monster Energy family of brands, and strength in Strategic and Affordable energy brands.
The company remains committed to product launches and innovation to boost growth. In third-quarter 2022, the company launched many products and expanded distribution in international markets. In the quarter, it launched Predator in Kazakhstan, Malaysia and Jordan, along with the continued rollout of Predator in India.
Consequently, MNST intends to introduce the Predator brand in additional countries in APAC in the last quarter of 2022 and the first half of 2023.
The company launched Monster Super Cola in a can in Japan in August and Monster Rehab Tea Plus Lemonade in October. In EMEA, it launched Monster Assault and Monster Reserve White Pineapple in certain countries. Also, MNST introduced Juiced Monarch, Juiced Chaotic, Ultra Rosa and Ultra Watermelon in a few countries.
The company launched additional SKUs of Burn, Predator and Rain in certain countries in the said quarter. In July, it introduced its first 16-ounce 12-pack ultra-variety packs in Puerto Rico. In August, the company launched Monster Reserve Watermelon and Reserve White Pineapple.
Monster Dragon Tea Lemon was launched in Honduras and El Salvador in August, while the same was launched in Guatemala in September. Monster Juice Monarch was launched in August. Its juice portfolio witnessed an expansion in Mexico in August. In Australia, the company expanded its Mother portfolio and launched Mother Lava Guava.
The company is on track to launch Monster Energy Zero Sugar in fourth-quarter 2022, initially in the United States. Monster Energy Zero Sugar is developed to provide a zero-sugar variant of its original Monster Energy Green flavor.
MNST revealed plans to launch pure unflavored water namely, Monster Tour Water, in the United States, in still and sparkling variants, in the first half of 2023. The company intends to launch Rainstorm in 4 flavors in the first half of 2023. Also, Monster Energy Lewis Hamilton Zero Sugar Energy Drink is likely to enter select EMEA markets in the fourth quarter of 2022, with a rollout to 20 additional markets in the first quarter of 2023.
The company remained optimistic about the launch of its first flavored malt beverage alcohol product, known as ‘The Beast Unleashed.’ Gains from the CANarchy acquisition, and a robust line-up of product launches for both alcoholic and non-alcoholic drinks make it well-placed for long-term growth.
MNST has been making efforts to overcome supply-chain challenges. Some of the notable actions taken to navigate through the challenges are decreasing its reliance on imported cans. The company is purchasing aluminum cans from local sources in the United States and EMEA. MNST also rebuilt and increased finished product inventory levels across the United States and EMEA to reduce the excessive cost of long-distance freight to meet consumer demand. It is returning to its orbit strategy of producing closer to customers.
Meanwhile, Monster Beverage is implementing pricing actions to overcome the ongoing cost pressures. In third-quarter 2022, the company was on track with the mitigation of higher production and distribution costs through pricing actions and lowered promotional expenses. It implemented price increases for its products in the United States on Sep 1, 2022. It also brought effective price increases in certain international markets in the third quarter.
Headwinds to Overcome
However, the company continues to grapple with inflationary operational costs for aluminum cans, shipping, freight and other inputs. This, along with elevated ingredients and other input costs, comprising secondary packaging materials and increased co-packing fees, hurt the margins. The company’s third-quarter 2022 gross margin contracted 460 basis points (bps) to 51.3%.
Operating expenses grew 20.6% year over year to $415.8 million due to higher warehousing and other logistical expenses, elevated payroll expenses, increased selling and marketing expenses, and increased general and administrative expenses. Also, operating income of $417.9 million declined 6% year over year, driven by a decrease in the gross margin, as well as higher operating expenses. The operating margin contracted 580 bps to 25.7% in the reported quarter. Consequently, third-quarter fiscal 2023 earnings of 60 cents per share declined 3.9% year over year.
Conclusion
Monster Beverages appears to be in good shape despite the industry challenges, driven by the introduction of innovative products across the Monster family to suit consumers’ needs as well as strength in its energy drinks category. Topping it, a long-term earnings growth rate of 11.4% raises optimism about the stock. Also, the Zacks Consensus Estimate for 2022 earnings has moved up 0.9% in the past 60 days.
Stocks to Consider
Here are some better-ranked stocks from the broader Consumer Staples space, namely Coca-Cola FEMSA (KOF - Free Report) , e.l.f. Beauty (ELF - Free Report) and Conagra Brands (CAG - Free Report) .
Coca-Cola FEMSA currently flaunts a Zacks Rank #1 (Strong Buy). KOF has a trailing four-quarter earnings surprise of 26% on average. It has a long-term earnings growth rate of 10.3%. The stock has gained 7.7% in the past three months.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Coca-Cola FEMSA’s current financial-year sales and earnings per share suggests growth of 15.6% and 6.2%, respectively, from the year-ago reported numbers. The consensus mark for KOF’s earnings per share has moved up 9.8% in the past seven days.
e.l.f. Beauty currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of 77%, on average. The stock has rallied 29% in the past three months.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings suggests growth of 17.6% and 8.3%, respectively, from the prior-year reported numbers. The consensus mark for ELF’s earnings per share has moved up a penny in the past seven days.
Conagra Brands, a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8% on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year’s sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the year-ago reported figures.