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Monster Beverage (MNST) Q4 Earnings Top Estimates, Rise Y/Y

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Monster Beverage Corporation (MNST - Free Report) reported impressive earnings and sales numbers in fourth-quarter 2019. Its top and bottom lines not only outpaced the Zacks Consensus Estimate but also improved on a year-over-year basis.

The top-line performance was mainly fueled by robust growth in the Monster Energy brand’s energy drinks internationally coupled with strength in its high-performance energy drink, Reign Total Body Fuel, launched in the first quarter of 2019.

We note that shares of this Zacks Rank #2 (Buy) company have increased 7.4% in the past six months compared with the industry’s growth of 4.6%.

Q4 Highlights

Monster Beverage’s earnings of 47 cents per share rose 9.3% year over year and outpaced the Zacks Consensus Estimate by a penny.

Monster Beverage Corporation Price, Consensus and EPS Surprise


Net sales of $1,017.2 million improved 10.1% year over year and surpassed the Zacks Consensus Estimate of $996.9 million. Moreover, gross sales (net of discounts and returns) rose 10.3% to $1,172.6 million. We note that top-line growth was negated by unfavorable currency fluctuations, which hurt net and gross sales by $9.1 million and $10.9 million, respectively.

Additionally, net sales to customers outside the United States totaled $319.5 million, up 16.5% year over year. This represented about 31% of total sales in fourth-quarter 2019, up from 30% in the year-ago quarter.

Segmental Performance

Monster Energy Drinks: The segment’s net sales rose 11.7% year over year to $953.2 million. Robust gains from the sale of Monster Energy and Reign Total Body Fuel brands were partly offset by a negative impact of $8.5 million from adverse currency rates.

Strategic Brands: Apart from its affordable energy drink brands, the segment includes a range of energy drink brands acquired from The Coca-Cola Company (KO - Free Report) . The segment’s net sales declined 10.1% to $59.2 million in the fourth quarter. Currency headwinds hurt the segment’s results by $0.6 million.

Other: Net sales at the segment, which includes some products of American Fruits & Flavors sold to independent third parties (AFF Third-Party Products), fell 3.9% year over year to $4.9 million.

Costs & Margins

The company’s fourth-quarter 2019 gross margin expanded 30 basis points (bps) to 60%. Gross margin was mainly impacted by negative geographic and product sales mix, partly offset by gains from increased prices and lower input costs.

Operating expenses rose 19.5% year over year to $293.7 million, while as a percentage of sales the same increased 230 bps to 28.9%. However, selling expenses, as a percentage of net sales, increased 100 bps to 12.3%. Meanwhile, distribution costs, as a percentage of net sales, declined 20 bps to 3.5%.

Operating income of $317 million grew 3.4% year over year. Moreover, the operating margin contracted 200 bps to 31.2% in the reported quarter.

Other Financials

Monster Beverage ended the fourth quarter with cash and cash equivalents of $798 million, and total stockholders' equity of $4,171.3 million.

In the reported quarter, the company bought back 4.1 million shares for $229.6 million, excluding broker commissions. As of Feb 27, 2020, it had around $536.6 million remaining under the company’s previously authorized share repurchase plan.

Strategies on Track

Monster Beverage remains committed to product launches and innovation to boost growth. In fourth-quarter 2019, it launched Java Monster Farmer’s Oats and two new Reign Total Body Fuel high performance energy drinks in the United States. Internationally, the company added various Monster Energy brand energy drinks, as well as Espresso Monster to its portfolio and launched Monster HydroSport Super Fuel in Germany, the Republic of Ireland and the United Kingdom during the fourth quarter.  

Also, Monster Beverage launched Reign Total Body Fuel high performance energy drinks in Puerto Rico, the Republic of Ireland and the United Kingdom and is planning further introductions in other international markets in 2020. It also launched the Predator brand in other international markets and plans to expand further in 2020.

Recently, the company launched Monster Energy brand energy drinks in Israel. It also plans to introduce new products in 2020.

Other Stocks in the Beverage Industry

Brown-Forman Corporation (BF.B - Free Report) has a long-term earnings growth rate of 7.5% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Keurig Dr Pepper Inc. (KDP - Free Report) has a long-term earnings growth rate of 15.2% and carries a Zacks Rank #2.

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