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Energy Drinks & New Products Aid Monster Beverage (MNST) Sales
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Monster Beverage (MNST - Free Report) has long been gaining from continued strength in its energy drinks category. Also, product launches and innovation, as well as pricing actions, bode well.
Pricing increases, along with lower freight-in costs and reduced aluminum can costs, contributed to the company’s margins in second-quarter 2023. The gross margin expanded 540 basis points (bps) year over year to 52.5%, beating our estimate of 47.3%. Operating income of $523.8 million rose 40% year over year and beat our estimate of $429.2 million. The upside was driven by an increased gross margin. The operating margin expanded 570 bps year over year to 28.2% in the reported quarter, which surpassed our estimate of 23.3%.
Strength in its energy drinks category acts as a key growth driver. In second-quarter 2023, the Monster Energy Drinks segment's net sales increased 9.7% year over year to $1.7 billion and met our estimate. On a currency-adjusted basis, net sales for the segment rose 12%.
The company is committed to product launches and innovation to boost growth. In second-quarter 2023, it launched many products and expanded distribution in the international markets. In the quarter, it continued with the roll-out of its first flavored malt beverage alcohol product, The Beast Unleashed, in the United States and received positive feedback.
Consequently, MNST is on track with the expansion of the distribution of The Beast Unleashed into additional markets, with nationwide distribution plans by the end of the year.
Monster Beverages continued to implement price hikes in the second quarter of 2023, with additional price hikes planned in a number of other markets through the remainder of the year. In some markets, this rise was in addition to price increases implemented in 2022. In the United States, management implemented an additional price increase on its 18.6 oz and 24 oz energy drinks, effective Apr 1, 2023.
These factors led to year-over-year sales growth of 12% on a reported basis and 14.4% on a currency-adjusted basis in second-quarter 2023. Sales to customers outside the United States rose 10%, representing about 39% of the total net sales. On a currency-adjusted basis, sales to customers outside the United States improved 16%.
However, it has been witnessing rising costs due to increased payroll expenses. The cost of sales was $880.7 million, up 0.6% year over year. Operating expenses grew 10.7% year over year to $450.4 million and surpassed our estimate of $443.7 million. Selling expenses, as a percentage of net sales, expanded 20 bps year over year to 9.3%. The company has also been witnessing supply-chain headwinds.
AB InBev continued to witness higher costs and soft margin trends in second-quarter 2023. The cost of sales increased 3.3% on a reported basis and 9.2% on an organic basis to $7,019 million in the second quarter.
SG&A expenses increased 9.4% on an organic basis due to elevated supply-chain costs. Also, commodity cost headwinds, and increased sales and marketing investments are concerning.
Clorox’s selling and administrative expenses rose 35% year over year to $329 million in fourth-quarter fiscal 2023. The metric, as a percentage of sales, expanded 280 bps from the prior-year figure at 16.3%, attributable to investments to enhance digital capabilities.
Going into fiscal 2024, CLX expects selling and administrative expenses to be 15-16% of sales, including 1.5 points of impact from its strategic investments in digital capabilities and productivity enhancements. Clorox anticipates advertising and sales promotion spending to be 11% of sales, driven by its commitment to investing in its brand portfolio. For fiscal 2024, management earlier expected a supply-chain inflation of $200 million.
Constellation Brands has been witnessing higher packaging and raw material costs stemming from continued inflationary pressures. Moving on, higher overhead costs related to its brewery expansion, as well as increased logistics costs related to higher shipment volumes, act as deterrents.
As a result, COGS rose 13.4% year over year to $1,257.1 million in first-quarter fiscal 2024. For fiscal 2024, the company expects higher packaging and raw materials, freight and overhead costs.
Conclusion
Monster Beverages appears well-placed for growth despite rising costs, driven by the introduction of innovative products across the Monster family to meet consumers’ needs, and strength in its energy drinks category.
The PEG ratio for MNST is just 1.50, a level far lower than the industry average of 2.39. The PEG ratio is a modified PE ratio that considers the stock’s earnings growth rate. Clearly, MNST is a solid choice on the value front from multiple angles.
Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for fiscal 2023 sales and EPS is pegged at $7.2 billion and $1.54, suggesting respective growth of 13.7% and 37.5% from the year-ago reported figures.
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Energy Drinks & New Products Aid Monster Beverage (MNST) Sales
Monster Beverage (MNST - Free Report) has long been gaining from continued strength in its energy drinks category. Also, product launches and innovation, as well as pricing actions, bode well.
Pricing increases, along with lower freight-in costs and reduced aluminum can costs, contributed to the company’s margins in second-quarter 2023. The gross margin expanded 540 basis points (bps) year over year to 52.5%, beating our estimate of 47.3%. Operating income of $523.8 million rose 40% year over year and beat our estimate of $429.2 million. The upside was driven by an increased gross margin. The operating margin expanded 570 bps year over year to 28.2% in the reported quarter, which surpassed our estimate of 23.3%.
Strength in its energy drinks category acts as a key growth driver. In second-quarter 2023, the Monster Energy Drinks segment's net sales increased 9.7% year over year to $1.7 billion and met our estimate. On a currency-adjusted basis, net sales for the segment rose 12%.
The company is committed to product launches and innovation to boost growth. In second-quarter 2023, it launched many products and expanded distribution in the international markets. In the quarter, it continued with the roll-out of its first flavored malt beverage alcohol product, The Beast Unleashed, in the United States and received positive feedback.
Consequently, MNST is on track with the expansion of the distribution of The Beast Unleashed into additional markets, with nationwide distribution plans by the end of the year.
Monster Beverages continued to implement price hikes in the second quarter of 2023, with additional price hikes planned in a number of other markets through the remainder of the year. In some markets, this rise was in addition to price increases implemented in 2022. In the United States, management implemented an additional price increase on its 18.6 oz and 24 oz energy drinks, effective Apr 1, 2023.
These factors led to year-over-year sales growth of 12% on a reported basis and 14.4% on a currency-adjusted basis in second-quarter 2023. Sales to customers outside the United States rose 10%, representing about 39% of the total net sales. On a currency-adjusted basis, sales to customers outside the United States improved 16%.
However, it has been witnessing rising costs due to increased payroll expenses. The cost of sales was $880.7 million, up 0.6% year over year. Operating expenses grew 10.7% year over year to $450.4 million and surpassed our estimate of $443.7 million. Selling expenses, as a percentage of net sales, expanded 20 bps year over year to 9.3%. The company has also been witnessing supply-chain headwinds.
Similarly, other Consumer-Staples stocks, including AB InBev (BUD - Free Report) , The Clorox Company (CLX - Free Report) and Constellation Brands (STZ - Free Report) , have been witnessing rising costs and supply-chain challenges.
AB InBev continued to witness higher costs and soft margin trends in second-quarter 2023. The cost of sales increased 3.3% on a reported basis and 9.2% on an organic basis to $7,019 million in the second quarter.
SG&A expenses increased 9.4% on an organic basis due to elevated supply-chain costs. Also, commodity cost headwinds, and increased sales and marketing investments are concerning.
Clorox’s selling and administrative expenses rose 35% year over year to $329 million in fourth-quarter fiscal 2023. The metric, as a percentage of sales, expanded 280 bps from the prior-year figure at 16.3%, attributable to investments to enhance digital capabilities.
Going into fiscal 2024, CLX expects selling and administrative expenses to be 15-16% of sales, including 1.5 points of impact from its strategic investments in digital capabilities and productivity enhancements. Clorox anticipates advertising and sales promotion spending to be 11% of sales, driven by its commitment to investing in its brand portfolio. For fiscal 2024, management earlier expected a supply-chain inflation of $200 million.
Constellation Brands has been witnessing higher packaging and raw material costs stemming from continued inflationary pressures. Moving on, higher overhead costs related to its brewery expansion, as well as increased logistics costs related to higher shipment volumes, act as deterrents.
As a result, COGS rose 13.4% year over year to $1,257.1 million in first-quarter fiscal 2024. For fiscal 2024, the company expects higher packaging and raw materials, freight and overhead costs.
Conclusion
Monster Beverages appears well-placed for growth despite rising costs, driven by the introduction of innovative products across the Monster family to meet consumers’ needs, and strength in its energy drinks category.
The PEG ratio for MNST is just 1.50, a level far lower than the industry average of 2.39. The PEG ratio is a modified PE ratio that considers the stock’s earnings growth rate. Clearly, MNST is a solid choice on the value front from multiple angles.
Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for fiscal 2023 sales and EPS is pegged at $7.2 billion and $1.54, suggesting respective growth of 13.7% and 37.5% from the year-ago reported figures.