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Monster Beverage (MNST) Q2 Earnings: What's in the Cards?

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Monster Beverage Corporation (MNST - Free Report) is slated to release second-quarter 2017 financial numbers on Aug 8, after the closing bell.

In the last reported quarter, the company delivered a positive earnings surprise of 3.13%. However, the company managed to surpass the Zacks Consensus Estimate in only two of the last four quarters, with an average beat of 0.82%.

The chart below depicts the surprise history.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

A look at estimate revisions gives us an idea of analyst expectations right before a company’s earnings release. The Zacks Consensus Estimate for second-quarter earnings per share remained stable over the past 30 days at 40 cents. This reflects a year-over-year increase of 20.2%.

This double-digit expected earnings growth is likely to be driven by higher sales banking on innovations, solid demand for the company’s energy drink brands and expansion into new markets.

Product innovation plays a major role in the company’s success. The company regularly introduces new flavors of existing products, while removing non-performing products. Again, the company's strategic deal with The Coca-Cola Company (KO - Free Report) expanded its portfolio with notable brands with increased presence in the international energy drinks market. This addition has been boosting the company’s sales and such a trend is likely to continue in the to-be-reported quarter as well.

However, Monster Beverage’s sales and profits have been dented significantly by unfavorable currency translations. Although the U.S. dollar has recently softened against other currencies, the impact is still significant. Expenses associated with expansion, such as higher payroll expenses, are also likely to impact the company’s profitability.

Distributor termination expenses too might affect the company’s bottom line. The company has been transitioning from third-party distributors to Coca-Cola’s distribution network following the strategic deal with Coca-Cola.

Analysts polled by Zacks expect revenues of $906.6 million for the said quarter, reflecting an increase of 9.6% from the year-ago quarter.

Earnings Whispers

Our proven model does not conclusively show that Monster Beverage is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Monster Beverage’s Earnings ESP is 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 40 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Monster Beverage’s Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of a positive earnings surprise.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are two consumer staples stocks that you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter.

Energizer Holdings, Inc. (EPC - Free Report) has an Earnings ESP of +1.27% and a Zacks Rank #3. The company is scheduled to report its quarterly numbers on Aug 8.

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

Coca-Cola European Partners PLC (CCE - Free Report) has an Earnings ESP of +4.69% and a Zacks Rank #2. The company is scheduled to report quarterly numbers on Aug 10.

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