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Monster Beverage Gains from Strength in Energy Drinks Category

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On Aug 23, we issued an updated research report on Monster Beverage Corporation MNST.

On Aug 4, 2016, Monster Beverage reported second-quarter 2016 results. Adjusted earnings of 99 cents per share missed the Zacks Consensus Earnings Estimate by 4.8%. However, earnings per share increased 25.3% year over year owing to lower tax rate and strong revenues.

Net sales of $827.5 million beat the Zacks Consensus Estimate by 2.4% and increased 19.3% year over year. The net sales increase was driven by strong domestic and international demand for Monster Energy brand energy drinks.

MONSTER BEVERAG Price and EPS Surprise


Monster Beverage’s long-term fundamentals remain impressive. The company reported strong gross margin expansion through 2015 and first half of 2016 on the back of price increase, strong sales of Monster Energy brand drinks and a favorable segment mix.

Moreover, with The Coca-Cola Company (KO - Free Report) deal, Monster Beverage is aggressively expanding in international markets, supported by strong demand in the energy drink category.

The company has a number of new products in its pipeline for late 2016 and early 2017, which should drive the top line further. These new products benefits from a broader distribution network as a result of the Coca-Cola deal. Also, the acquisition of American Fruits and Flavors is encouraging as it stabilizes flavor supply for the company.  

Though the U.S. dollar has softened against other currencies lately, the impact of unfavorable currency translations is still significant. Also the transitional impact of the Coca-Cola deal continues to hurt profits.

Monster Beverage has a Zacks Rank #3 (Hold).    

Stocks to Consider

Some better-ranked stocks in the consumer staples sector include Primo Water Corp. PRMW and Constellation Brands Inc. STZ. Both the three companies carry a Zacks Rank #2 (Buy).    

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