Monster Beverage Corporation
) is set to report first-quarter fiscal 2014 results on May 8,
after the market closes. Last quarter, it reported a negative
surprise of 2.22%. Let's see how things are shaping up for this
Factors to Consider This Quarter
Monster Beverage has been consistently missing earnings estimates
for the past seven quarters due to headwinds from higher
professional costs, currency headwinds, and increased tax rates.
Due to growing health and wellness consciousness the carbonated
soft drinks (CSD) category has now declined for the ninth straight
year. The challenges in the CSD category have been felt by all
major soft drink makers with lower volumes and weakening sales.
Recently the diet versions have begun to struggle with consumers
being increasingly aware of diet sweeteners. However, the energy
drink market has been gaining momentum, increasing at a high single
digit in the fourth quarter 2013.
Some of its new products such as Monster Ultra Blur energy drinks,
the new Muscle Monster line, tea plus pink lemonade and the energy
Monster Rehab line are performing better than expected. In fact,
the company introduced several new products throughout 2013 and has
a lineup of products for 2014. However, these new products have
been cannibalizing sales of its older brands such as Absolutely
Zero and Lo-Carb, for the past few quarters, a trend which is
expected to continue in the upcoming quarters.
The company has been facing several controversies of late. There
has been much speculation on whether its energy drinks are suitable
for consumption especially by children and adolescents. The Food
and Drug Administration is currently investigating the impact of
caffeine in food and dietary supplements, which includes Monster
Beverage products. The report is pending.
In addition, the company is incurring higher professional service
costs due to these regulatory and litigation issues. Any
undesirable changes in regulations will impact the company's
operations and demand for its products. Moreover, the pace of
overall economic recovery is relatively slow. The consumer
environment in the U.S. continues to be challenging despite
Our proven model does not conclusively show that Monster Beverage
is likely to beat earnings this quarter. That is because a stock
needs to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the
case here, as you will see below.
Negative Zacks ESP:
The Earnings ESP is -4.08%.
Zacks Rank #4 (Sell).
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the consumer staples sector that
can be considered as our model shows that they have the right
combination of elements to post an earnings beat this quarter:
The J. M. Smucker Co.
), with Earnings ESP of +1.72% and a Zacks Rank #3 (Hold).
Diamond Foods, Inc.
), with Earnings ESP of +6.67% and a Zacks Rank #3
Treehouse Foods, Inc.
), Earnings ESP of +1.25% and a Zacks Rank #2.
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