Monster Beverage Corporation's
) second-quarter 2014 adjusted earnings of 81 cents per share
surpassed the Zacks Consensus Estimate of 76 cents by 6.6%. In
addition, earnings increased 31.5% year over year on the back of
solid margins, better cost leverage, and a lower tax rate.
Monster Beverage Corporation - Earnings
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Monster Beverage's second-quarter 2014 net sales of $687.2 million
lagged the Zacks Consensus Estimate of $698 million by 1.5%.
Revenues were affected by softer growth rates in the Energy
category in both the U.S and international markets. In addition,
revenues continued to be eroded by cannibalization of sales of
existing brands like Absolutely Zero and Lo-Carb by new products
such as Ultra and Muscle Monster products.
However, net sales rose 8.9% year over year driven by higher sales
of new products like Ultra and Monster Original Green energy drink.
Some of the brands that did well in the quarter include Java
Monster, strawberry and peanut butter cup Muscle Monster energy
drinks and Peace Tea Line.
Net sales of the Direct Store Delivery (DSD) segment increased 9.8%
to $660.1 million due to higher sales volumes of Monster Energy
Net sales of the Warehouse segment decreased 9.5% to $27.1 million
due to lower sales of Hubert's Lemonades.
Gross sales outside the U.S. increased 12.3% year over year to
$180.2 million in the quarter. The company witnessed a 14.6%
increase in sales in Europe, the Middle East and Africa.
Second-quarter 2014 gross margin rose 190 basis points (bps) to
55.2% attributable to a decrease in cost of goods, particularly
sweetener, increased sale of the Ultra line and a decline in
Operating income increased 20.3% to $215.8 million owing to higher
operating profit from international operations such as the Europe,
Middle East and Africa regions. Operating margin was 31.4%,
up 300 bps year over year, on the back of solid revenue, partially
offset by higher professional service cost.
Monster Beverage has been involved in several controversies. The
Food and Drug Administration is currently investigating the impact
of caffeine in food and dietary supplements, which includes Monster
Beverage's products. All these regulatory and litigation issues are
increasing the company's professional service cost. Monster
Beverage's legal expenses during the quarter were $7.9 million, up
from $5.0 million in the prior quarter.
As a percentage of revenue, distribution costs decreased 10 bps to
4.4% while selling expenses declined 110 bps to 10.5%. The company
benefited from a decline in premiums, point of sale and other
Effective tax rate in the quarter was 34.7%, lower than 39.3% in
the prior-year quarter, owing to profits earned in foreign
The company ended the quarter with cash and cash equivalents of
$373.1 million as of Jun 30, 2014, compared with $312.0 million as
of Mar 31, 2014. During the second quarter of 2014, the company did
not repurchase any shares under its existing share repurchase
Monster Beverage carries a Zacks Rank #4 (Sell).
Key Picks from the Sector
Better-ranked stocks in the consumer goods industry include The
WhiteWave Foods Company (
), Pepsico, Inc. (
) and Dr Pepper Snapple Group, Inc. (
). All the three companies carry a Zacks Rank #2 (Buy).
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