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Will Product Innovation Boost Monster's (MNST) Q1 Earnings?
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Monster Beverage Corporation (MNST - Free Report) is slated to release first-quarter 2018 numbers on May 8, after the closing bell. In the last reported quarter, the company’s earnings missed analysts’ expectation. The company surpassed the Zacks Consensus Estimate in only one of the last four quarters, the average being a negative 1.2%.
Let’s discuss the factors that are likely to drive the company’s first-quarter 2018 results.
Product Innovation
Product innovation plays a major role in boosting revenues. The company’s net sales grew 10.5% in 2017 on the back of a wide portfolio of energy drink brands that has been experiencing solid demand in domestic and international markets. The company also introduced a number of products in the quarter under review, which is expected to contribute to the upcoming quarterly results.
In the quarter to be reported, Monster Beverage launched Caffé Monster in three flavors, Monster Energy Ultraviolet, Monster Hydro in three flavors and relaunched Muscle Monster in two flavors.
It launched Monster Hydro in Sweden and Germany, Monster Energy Ultraviolet in the Czech Republic, Germany, Ireland and the United Kingdom along with Lewis Hamilton signature Monster Energy drink in Australia and New Zealand in the first quarter of 2018.
Strong Energy Drinks Momentum
Sales in the Monster Energy Drinks segment, accounting for 90% of total sales, improved 10.4% in 2017. Due to growing health awareness, consumers are particularly cautious about the use of artificial sweeteners and high sugar content products. As a result, the broader carbonated soft drinks (CSD) category has been suffering for the last few years. However, energy drinks constitute one of the few sub-categories that continue to gain momentum. Therefore, a portfolio based on energy drinks will drive the company’s top line.
Notably, strategic deals with notable brands bolstered the company’s portfolio and strengthened presence in the international energy drinks market. The Strategic Brands segment, which includes the various energy drink brands acquired from The Coca-Cola Company, improved more than 10% in 2017. The trend is expected to continue in the to-be-reported quarter.
Increased Costs to Hurt Margin
Higher raw material costs (mainly aluminum and sweeteners), unfavorable product mix that included more Java products coming online (lower-margin product) as well as inventory destocking in China dented gross margin by 390 basis points (bps) in the preceding quarter. The company expects gross margin to be similar to the fourth-quarter level going forward, as the headwinds are expected to persist at least through the first half of 2018, barring inventory reserves in China. Along with this, higher distribution costs from higher freight expenses are expected to create pressure on operating margin in 2018.
Overall, the Zacks Consensus Estimate for first-quarter 2018 revenues is pegged at $859.8 million, reflecting an increase of 15.9% year over year. Meanwhile, the consensus estimate for earnings is 39 cents, implying 18.2% year-over-year growth.
Quantitative Model Prediction
Monster Beverage does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — which increases the odds of an earnings beat.
Zacks ESP: Monster Beverage has an Earnings ESP of +0.64%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Monster Beverage carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Ranks #4 and 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The Coca-Cola Company (KO - Free Report) started off 2018 on a strong note, beating the Zacks Consensus Estimate for both the counts in first-quarter 2018.
Dr Pepper Snapple Group’s first-quarter 2018 earnings missed the Zacks Consensus Estimate while revenues beat the same. Revenues benefited from a growth in sales volumes, favorable product and package mix, segment mix as well as foreign currency translation.
PepsiCo, Inc. (PEP - Free Report) reported first-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate. The improvement was mainly attributable to strong performances in its international divisions, propelled by higher revenue growth in developing and emerging markets.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Will Product Innovation Boost Monster's (MNST) Q1 Earnings?
Monster Beverage Corporation (MNST - Free Report) is slated to release first-quarter 2018 numbers on May 8, after the closing bell. In the last reported quarter, the company’s earnings missed analysts’ expectation. The company surpassed the Zacks Consensus Estimate in only one of the last four quarters, the average being a negative 1.2%.
Let’s discuss the factors that are likely to drive the company’s first-quarter 2018 results.
Product Innovation
Product innovation plays a major role in boosting revenues. The company’s net sales grew 10.5% in 2017 on the back of a wide portfolio of energy drink brands that has been experiencing solid demand in domestic and international markets. The company also introduced a number of products in the quarter under review, which is expected to contribute to the upcoming quarterly results.
In the quarter to be reported, Monster Beverage launched Caffé Monster in three flavors, Monster Energy Ultraviolet, Monster Hydro in three flavors and relaunched Muscle Monster in two flavors.
It launched Monster Hydro in Sweden and Germany, Monster Energy Ultraviolet in the Czech Republic, Germany, Ireland and the United Kingdom along with Lewis Hamilton signature Monster Energy drink in Australia and New Zealand in the first quarter of 2018.
Strong Energy Drinks Momentum
Sales in the Monster Energy Drinks segment, accounting for 90% of total sales, improved 10.4% in 2017. Due to growing health awareness, consumers are particularly cautious about the use of artificial sweeteners and high sugar content products. As a result, the broader carbonated soft drinks (CSD) category has been suffering for the last few years. However, energy drinks constitute one of the few sub-categories that continue to gain momentum. Therefore, a portfolio based on energy drinks will drive the company’s top line.
Notably, strategic deals with notable brands bolstered the company’s portfolio and strengthened presence in the international energy drinks market. The Strategic Brands segment, which includes the various energy drink brands acquired from The Coca-Cola Company, improved more than 10% in 2017. The trend is expected to continue in the to-be-reported quarter.
Increased Costs to Hurt Margin
Higher raw material costs (mainly aluminum and sweeteners), unfavorable product mix that included more Java products coming online (lower-margin product) as well as inventory destocking in China dented gross margin by 390 basis points (bps) in the preceding quarter. The company expects gross margin to be similar to the fourth-quarter level going forward, as the headwinds are expected to persist at least through the first half of 2018, barring inventory reserves in China. Along with this, higher distribution costs from higher freight expenses are expected to create pressure on operating margin in 2018.
Overall, the Zacks Consensus Estimate for first-quarter 2018 revenues is pegged at $859.8 million, reflecting an increase of 15.9% year over year. Meanwhile, the consensus estimate for earnings is 39 cents, implying 18.2% year-over-year growth.
Quantitative Model Prediction
Monster Beverage does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — which increases the odds of an earnings beat.
Zacks ESP: Monster Beverage has an Earnings ESP of +0.64%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Monster Beverage carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Ranks #4 and 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Monster Beverage Corporation Price and EPS Surprise
Monster Beverage Corporation Price and EPS Surprise | Monster Beverage Corporation Quote
Peer Releases
The Coca-Cola Company (KO - Free Report) started off 2018 on a strong note, beating the Zacks Consensus Estimate for both the counts in first-quarter 2018.
Dr Pepper Snapple Group’s first-quarter 2018 earnings missed the Zacks Consensus Estimate while revenues beat the same. Revenues benefited from a growth in sales volumes, favorable product and package mix, segment mix as well as foreign currency translation.
PepsiCo, Inc. (PEP - Free Report) reported first-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate. The improvement was mainly attributable to strong performances in its international divisions, propelled by higher revenue growth in developing and emerging markets.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>