Will Monster Beverage (MNST) Disappoint this Earnings Season? - Analyst Blog


Monster Beverage Corporation ( MNST ) is set to report second-quarter fiscal 2014 results on Aug 7, after the market closes. Last quarter, it posted a positive surprise of 12.2%. Let's see how things are shaping up for this announcement.

Factors to Consider this Quarter

Though the carbonated soft drinks (CSD) category has remained weak in 2013, the energy drink market has shown some positive momentum. However, Monster Beverage Corporation has been facing several headwinds for the past few quarters, which is hurting its profits.  

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 products. All these regulatory and litigation issues are increasing Monster Beverage's professional service expenses, which are eroding its margins. We believe the second quarter profits will also be pulled down by these legal costs.

In addition, new Monster Energy branded products like Ultra and Muscle Monster products are cannibalizing sales of the existing brands like Absolutely Zero and Lo-Carb. Revenues are also impacted by lower growth rates for the energy category in the Europe, the Middle East and Africa region, particularly Eastern Europe. Second quarter 2014 results are expected to be impacted by these trends.

Earnings Whisper?

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 Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Positive Zacks ESP:  The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.32%.

Zacks Rank: Monster currently has a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. 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:

Pinnacle Foods Inc. ( PF ), Earnings ESP of +3.03% and a Zacks Rank #2 (Buy).

Keurig Green Mountain, Inc. ( GMCR ), Earnings ESP of +2.30% and a Zacks Rank #3 (Hold).

SUPERVALU Inc. ( SVU ), Earnings ESP of +9.09% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CSD , SVU , GMCR , MNST , PF



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