An Eye on Earnings Report: Monster Beverage Corporation (NASDAQ: MNST)

On Monday, Shares of Monster Beverage Corporation (NASDAQ: MNST) gained 0.49% to $57.58. The stock opened its trade at $57.23 and after floating in a price range of $56.97 to $57.99; the stock grabbed the investor’s attention and traded 2.29M shares as compared to its average daily volume of 3.56M shares. The stock’s institutional ownership stands at 66.50%.

Monster Beverage Corporation (MNST) recently stated financial results for the first quarter ended March 31, 2018.

Net sales for the 2018 first quarter increased 14.7 percent to $850.90M from $742.10M in the same period last year.  Gross sales for the 2018 first quarter increased 17.2 percent to $990.60M from $845.50M in the same period last year.  Net sales for the 2018 first quarter were negatively influenced by $9.90M, because of the adoption of Accounting Standards Codification (“ASC”) 606. Under ASC 606, commissions paid to The Coca-Cola Company (“TCCC”), based on sales to certain of the Company’s customers which TCCC accounts for under the equity method (the “TCCC Related Parties”), or consolidates, are included as a reduction to net sales. Before January 1, 2018, commissions based on sales to the TCCC Related Parties were included in operating expenses. Net changes in foreign currency exchange rates had a favorable impact on net and gross sales for the 2018 first quarter of $17.70M and $22.20M, respectively.

Net sales for the Company’s Monster Energy® Drinks segment, which includes the Company’s Monster Energy® drinks, Monster Hydro® energy drinks and Mutant® Super Soda drinks, increased 16.7 percent to $780.50M for the 2018 first quarter, from $668.60M for the same period last year.  Net sales for the Company’s Monster Energy® Drinks segment for the 2018 first quarter were negatively influenced by $3.90M, because of the adoption of ASC 606. Net sales for the Company’s Planned Brands segment, which includes the various energy drink brands attained from The Coca-Cola Company, reduced 3.3 percent to $65.80M for the 2018 first quarter, from $68.00M in the comparable 2017 quarter.  Net sales for the Company’s Planned Brands segment for the 2018 first quarter were negatively influenced by $6.00M, because of the adoption of ASC 606.  Net sales for the Company’s Other segment, which includes certain products of American Fruits & Flavors sold to independent third parties, were $4.70M for the 2018 first quarter, contrast with $5.50M in the 2017 first quarter.

Net sales to customers outside the United States increased 26.8 percent to $242.10M in the 2018 first quarter, from $190.90M in the corresponding quarter in 2017.

Operating expenses for the 2018 first quarter were $235.30M, contrast with $216.60M in the 2017 first quarter.  Operating expenses included distributor termination expenses of $7.00M for the 2018 first quarter, contrast with $19.90M in the 2017 first quarter.  As a result of the adoption of ASC 606, commissions included in operating expenses reduced.

General and administrative expenses for the 2018 first quarter were $104.80M, or 12.3 percent of net sales, contrast with $107.10M, or 14.4 percent of net sales, for the comparable 2017 first quarter.  Stock-based compensation (a non-cash item) was $13.40M for the first quarter of 2018, contrast with $13.10M in the first quarter last year.

Operating income for the 2018 first quarter increased to $279.90M from $264.30M in the comparable 2017 quarter.

Net income for the 2018 first quarter increased 21.4 percent to $216.10M from $178.00M in the comparable quarter last year.  Net income per diluted share for the 2018 first quarter increased 23.1 percent to $0.38 from $0.31 in the first quarter of 2017. The Company estimates that distributor termination expenses in the 2018 first quarter reduced stated earnings by about $0.01 per share, after tax.

During 2018 first quarter, the Company purchased about 4.30M shares of its common stock at an average purchase price of $57.74 per share, for a total amount of $249.90M (excluding broker commissions), which exhausted availability under the repurchase plan authorized by the Board of Directors in February 2017.  In February 2018, the Company’s Board of Directors authorized a new $250.00M share repurchase program.  No shares have been repurchased following the new repurchase program.

MNST has a market value of $31.62B while its EPS was booked as $1.56 in the last 12 months. The stock has 549.23M shares outstanding. In the profitability analysis, the company has gross profit margin of 61.00% while net profit margin was 24.70%. Beta value of the company was 1.28; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 2.10.

Eric Clapton

Eric Clapton

I am Eric Clapton and has over 14 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

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