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Monster Beverage (MNST) Q3 Earnings in Line, Revenues Beat

Zacks

Monster Beverage Corporation MNST reported mixed third-quarter 2017 results, wherein the top line beat the Zacks Consensus Estimate while the bottom line met the same.

However, shares of this leading energy drink maker were down 5.2% in after-hours trading on Nov 8, after the company announced the results.

The negative impact of distributor termination expenses on earnings and the year-over-year decline in gross margin might have hurt investors’ sentiments.

Earnings & Revenue Discussion

Monster Beverage reported earnings of 38 cents per share. Earnings when adjusted for non-recurring costs came in at 40 cents per share, in line with the consensus estimate. Adjusted earnings however increased 21.2% year over year on higher sales.

Net sales of $909.5 million beat the Zacks Consensus Estimate of $901.1 million by 0.9%. The figure improved 15.4% year over year.

Net sales to customers outside the United States increased 36.3% to $260.1 million in quarter, from $190.8 million in the year ago quarter.

Monster Beverage Corporation Price, Consensus and EPS Surprise


Quarterly Segment Details

Monster Energy Drinks: Net sales were $827.7 million, up 16.6% year over year. Net sales in the segment were somewhat affected by approximately $0.4 million owing to foreign currency movements.

Strategic Brands: This segment includes various energy-drink brands acquired from Coca-Cola KO. Net sales at the segment rose 6.2% to $76.6 million in the quarter. Favorable foreign currency movements drove sales by around $1.1 million in the quarter.

Other: Net sales at the segment, which includes some products of American Fruits & Flavors sold to independent third parties, were down 8.8% year over year to $5.2 million.

Inside the Headline Numbers

Third-quarter 2017 gross margin fell 120 basis points (bps) to 62.6% due to geographic sales mix since the company’s international operations have a lower profit margin.

Operating expenses, including $15.9 million in distributor termination expenses, increased 18.7% year over year to $252.3 million. Operating income in the quarter was $317.4 million, up 9.3% year over year.

Selling expenses, as a percentage of net sales, were 12.7%, higher than 12.1% in third-quarter 2016.

Effective tax rate in the quarter was 31.9%, compared with 33.8% in the prior-year quarter.

Financials

Monster Beverage ended the quarter with cash and cash equivalent of $465.6 million as of Sep 30, 2017, compared with $377.6 million as of Dec 31, 2016.

Monster Beverage carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Coca-Cola reported better-than-expected results in third-quarter 2017. Adjusted earnings were 50 cents per share, surpassing the Zacks Consensus Estimate of 49 cents by 2%.

PepsiCo, Inc. PEP reported mixed results in third-quarter 2017, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Earnings per share of $1.48 beat the Zacks Consensus Estimate of $1.42 by 4.2%.

Dr Pepper Snapple Group Inc.’s DPS adjusted third-quarter 2017 earnings per share of $1.10 missed the Zacks Consensus Estimate of $1.15 by 4.3%.

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