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Will Monster Beverage (MNST) Beat Earnings Estimates in Q3?

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Monster Beverage Corporation (MNST - Free Report) is slated to release third-quarter 2018 results on Nov 7.

In the last reported quarter, the company delivered positive earnings surprise of 2.1%. However, it delivered an average negative earnings surprise of 0.8% in the trailing four quarters. The Zacks Consensus Estimate for third-quarter earnings of 46 cents remained unchanged in the last 30 days. It represents 15% year-over-year improvement.

Let’s see how things are shaping up prior to the upcoming earnings release.

Factors Likely to Impact Q3

Monster Beverage has been witnessing solid momentum in the energy category amid a tepid beverage industry. The company offers a wide range of energy drink brands such as Monster Energy, Java Monster and Worx Energy among others. Further, the addition of Coca-Cola’s energy drink brands to the company’s portfolio strengthened its position in the global energy drinks market. Moreover, the company’s top line is poised to benefit from its product innovation strategy and regular product launches.

In the second quarter of 2018, management launched Monster Energy brand with the Coca-Cola bottlers in Belarus, Tanzania and Uruguay, beside relaunching the brand with a Coca-Cola bottler in certain cities across India. Monster Beverage plans for more international launches in 2018. Meanwhile, the company remains optimistic about its energy drinks category to continue gaining momentum, owing to Monster Energy, Monster Hydro and Mutant drinks. Latest additions to the Monster brand are expected to generate incremental sales and boost profitability.

This apart, Monster Beverage remains optimistic about product benefits from the broader distribution network as a result of the Coca-Cola deal. In fact, the company has been expanding its international operations into a variety of new markets, including China, India, African and the Middle Eastern countries. Evidently, net sales to customers outside the United States were up 18.5% in the second quarter of 2018.

All these initiatives are expected to boost the company’s top line in the third quarter. Notably, the Zacks Consensus Estimate for quarterly revenues stands at $990.8 million, reflecting an increase of 8.9% year over year. Moreover, the stock gained 1.5% in the last six months against the industry’s 1.3% decline.

However, higher raw material costs, mainly aluminum; and unfavorable product mix continue to remain hurdles. This, in turn, might dent the company’s margins in the upcoming quarter. Further, softness in the beverage industry due to growing consciousness regarding health and wellness is hurting performance. Further, better beverage alternatives like ready-to-drink tea and bottled water, as well as the shift in consumer preferences have been impacting volumes of sodas and energy drinks.

Zacks Model
Our proven model shows that Monster Beverage is likely to beat earnings estimates in the second quarter. This 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Monster Beverage has an Earnings ESP of +3.01% and a Zacks Rank #3, making us confident of an earnings beat.

Other Stocks With Favorable Combination

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to deliver an earnings beat:

Archer Daniels Midland Company (ADM - Free Report) has an Earnings ESP of +0.21% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Turning Point Brands, Inc. (TPB - Free Report) has an Earnings ESP of +8.74% and a Zacks Rank #3.

Nu Skin Enterprises, Inc. (NUS - Free Report) has an Earnings ESP of +0.21% and a Zacks Rank of 3.

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