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Monster Beverage (MNST) Tops Q1 Earnings & Sales Estimates

Monster Beverage Corporation MNST delivered impressive first-quarter 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. Results gained from the expansion of the energy drinks category and product launches.

We note that shares of this Zacks Rank #3 (Hold) company have gained 12.5% in the past three months compared with the industry’s 10.5% growth.

Monster Beverage’s earnings of 38 cents per share exceeded the Zacks Consensus Estimate of 34 cents and our estimate of 31 cents. The figure also advanced 36.6% year over year.

Net sales of $1,699 million improved 11.9% year over year and beat the Zacks Consensus Estimate of $1,690 million and our estimate of $1,672.8 million. Unfavorable currency translations hurt net sales by $52 million in the reported quarter. On a currency-adjusted basis, net sales rose 15.3%.

Net sales to customers outside the United States rose 12.6% to $622.9 million, representing about 37% of the total net sales. On a currency-adjusted basis, sales to customers outside the United States improved 21.9%.

 

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Zacks Investment Research


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Segmental Performance

Monster Energy Drinks: The segment includes Monster Energy drinks, Reign Total Body Fuel high-performance energy drinks and True North Pure Energy Seltzers. The segment’s net sales increased 11.2% year over year to $1.6 billion. The segment’s sales included a negative impact of $49 million from adverse currency rates. On a currency-adjusted basis, net sales for the segment rose 14.6%.

Strategic Brands: In addition to the affordable energy drink brands, the segment includes a range of energy drink brands acquired from Coca-Cola. The segment’s net sales decreased 6.7% year over year to $86.4 million in the first quarter. However, currency headwinds hurt the segment’s sales by $3 million. On a currency-adjusted basis, net sales for the segment fell 3.5%.

Alcohol Brands: Net sales for the segment, which includes various craft beers and hard seltzers purchased as part of the CANarchy transaction on Feb 17, 2022, surged 204.4% to $46.3 million for the fourth quarter.

Other: Net sales for the segment, which includes some products of American Fruits & Flavors sold to independent third parties (AFF Third-Party Products), declined 22.2% year over year to $4.6 million.

Costs & Margins

The cost of sales was $801.1 million, up 8% year over year.

The company’s first-quarter 2023 gross margin expanded 170 basis points (bps) to 52.8%, driven by pricing actions, lower freight-in costs and reduced aluminum can costs. The metric increased on a sequential basis due to the aforementioned factors. On the flip side, elevated ingredients and other input costs, as well as co-packing fees, acted as deterrents.

Operating expenses grew 9.4% year over year to $412.8 million. The increase can be attributed to higher payroll expenses, as the company is purchasing aluminum cans from local sources. As a percentage of sales, operating expenses contracted 50 bps to 24.3%. Selling expenses, as a percentage of net sales, expanded 20 bps year over year to 8.8%.

Distribution costs, as a percentage of net sales, contracted 90 bps to 4.5%, driven by reduced freight out expenses, somewhat offset by higher warehouse expenses stemming from rising raw materials and finished product inventories in the United States and EMEA.  General and administrative expenses, as a percentage of net sales, expanded 10 bps year over year to 11%.

Operating income of $485.1 million rose 21.4% year over year, driven by an increase in the gross margin, as well as lower operating expenses. The operating margin expanded 230 bps to 28.6% in the reported quarter.

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Monster Beverage Corporation Price, Consensus and EPS Surprise

 

Monster Beverage Corporation price-consensus-eps-surprise-chart | Monster Beverage Corporation Quote

Other Financials

Monster Beverage ended first-quarter 2023 with cash and cash equivalents of $1,672.7 million, and total stockholders' equity of $7,395.4 million. Short-term investments, as of Mar 31, 2023, were $1,383 million, whereas long-term investments were $41.2 million.

In the reported quarter, the company bought back no shares. As of May 4, 2022, it had $682.8 million remaining under the previously authorized share repurchase plan.

On Mar 10, 2023, the company retired 170 million shares of its treasury stock with a carrying value of $4.69 billion.

The company announced a 2-for-1 split of its common stock that will be reflected in the form of a 100% stock dividend. The common stock dividend was issued on Mar 27, 2023, and began trading at the split-adjusted price on Mar 28, 2023.

Business Developments

The company implemented price hikes in the first quarter of 2023, with additional price hikes planned in a number of other markets through the remainder of the year. In some markets, this rise is in addition to price increases implemented in 2022. In the United States, management implemented an additional price increase on our 18.6 oz and 24 oz energy drinks, effective Apr 1, 2023.

In the United States, the company launched Monster Energy Zero Sugar at retail in January and Monster Energy Ultra Strawberry Dreams, Monster (stylized) Reserve Kiwi Strawberry, Monster Energy Nitro Cosmic Peach and Java Monster Caffe Latte in the quarter under review. In March, it launched Reign Storm, a total wellness energy drink, in 12 oz sleek cans at retail in four flavors, to meet the growing demand for the energy drink category.

Monster Energy’s launch of its first flavored malt beverage alcohol product, The Beast Unleashed, across six states in four flavors has received positive feedback. As a result, it is expanding distribution into additional markets.  At the end of the first quarter, the company initialized the phased launch of Monster Tour Water, a pure unflavored water line, in still and sparkling variants, in the United States.

In EMEA, as part of an ongoing pan-EMEA launch, the company distributed Monster Energy Lewis Hamilton 44 Zero Sugar. It also launched Fury, its affordable energy brand, in Egypt in the said quarter.

The company revealed plans to transition the Monster brand to the Coca-Cola distribution system in the Philippines.

Stocks to Consider

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Procter & Gamble PG, Conagra Brands CAG and Church & Dwight Co. CHD.

Procter & Gamble currently carries a Zacks Rank #2 (Buy). PG has a trailing four-quarter earnings surprise of 1.02%, on average. It has a long-term earnings growth rate of 6.1%.

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

The Zacks Consensus Estimate for Procter & Gamble’s current financial-year sales and earnings per share suggests growth of 1.3% and 0.9%, respectively, from the year-ago reported numbers. The consensus mark for PG’s earnings per share has moved up by a penny in the past seven days.

Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average. It has a long-term earnings growth rate of 6.4%.

The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests improvements of 7.1% and 16.5%, respectively, from the year-ago reported number. The consensus mark for CAG’s earnings per share has moved up 3.4% in the past 30 days.

Church & Dwight currently has a Zacks Rank #2 and an expected long-term earnings growth rate of 7.6%. CHD has a trailing four-quarter earnings surprise of 9.8%, on average.

The Zacks Consensus Estimate for Church & Dwight’s current financial-year sales and earnings suggests growth of 5.9% and 4%, respectively, from the year-ago reported numbers. The consensus mark for CHD’s earnings per share has moved up by a penny in the past seven days.

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Procter & Gamble Company (The) (PG) : Free Stock Analysis Report

Conagra Brands (CAG) : Free Stock Analysis Report

Church & Dwight Co., Inc. (CHD) : Free Stock Analysis Report

Monster Beverage Corporation (MNST) : Free Stock Analysis Report

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