Why Is Monster Beverage (MNST) Up 9% Since the Last Earnings Report?

About a month has gone by since the last earnings report for Monster Beverage Corporation (MNST). Shares have added about 9% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Third-Quarter 2017 Results

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

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.

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. 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.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last month as none of them issued any earnings estimate revisions.

Monster Beverage Corporation Price and Consensus

 

Monster Beverage Corporation Price and Consensus | Monster Beverage Corporation Quote

VGM Scores

At this time, Monster Beverage's stock has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was also allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is solely suitable for growth investors.

Outlook

Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.

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