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Here's Why Investors Should Buy Monster Beverage (MNST) Stock

Monster Beverage Corporation MNST has been constantly gaining pace despite the coronavirus outbreak-led downturns. We assume that the stock has been unaffected due to the continuity of its business amid lockdowns as well as the demand for its energy drinks. The company’s energy drink portfolio has been popular among customers for its taste and variety. We note that Monster Beverage offers a wide range of energy drink brands such as Monster Energy, Java Monster, Cafe Monster and Espresso Monster.

In first-quarter 2020, net sales for the Monster Energy Drinks segment rose 14% year over year, driven by gains from the Monster Energy brand energy drinks internationally as well as Reign Total Body Fuel high-performance energy drinks. Moving ahead, management is optimistic about the strength in the energy drinks category, with the Monster Energy brand growing significantly. Also, the product launches across the Monster family will drive the company’s overall top and bottom lines.

We note that the COVID-19 outbreak had a minimal impact on the company’s first-quarter results, as its flavor manufacturing facilities, co-packers, warehouses and shipment facilities remained operational, maintaining continued supplies. Its bottom-line results for the first quarter reflected gains from cost leverage. Notably, operating expense leverage more than offset the soft gross margin, leading to operating margin growth. Consequently, its top and bottom lines not only outpaced the Zacks Consensus Estimate but also improved on a year-over-year basis.

Driven by the recent trend and strong fundamentals, the Monster Beverage stock has risen 15.7% year to date against the industry’s decline of 0.5%. Moreover, the stock has comfortably outpaced the consumer staples sector’s gain of 3.2% and S&P 500’s growth of 13%. Overall, the Zacks Rank #2 (Buy) stock, with a long-term earnings growth rate of 8.6% and a VGM Score of B, is poised for more growth ahead.

 


 

Coming to other strategies, product innovation plays a significant role in the company’s success. Monster Beverage remains committed to product launches and innovation to boost growth. In first-quarter 2020, it launched several products in the United States, including a line of Reign Inferno Thermogenic Fuel, two new energy drinks in the Monster Ultra line, a line of Java Monster 300, and a line of Monster Hydro Super Sport as well as NOS Turbo. Further, the company launched various Monster Energy drinks and Reign Total Body Fuel high-performance energy drinks in international markets.

Moreover, its affordable energy brand — Predator — was launched in additional international markets, including Mexico, in the first quarter. The company plans to launch the brand to more markets in 2020. Other notable product launches included the Monster Energy Dragon Tea in Brazil in the first quarter and in April 2020 in China. The company also added the Burn Dark Energy to its portfolio in Russia, a new Nalu energy tea line in Belgium, and the national launch of Mother Epic Swell in Australia, after a limited launch last year.

However, recent trends indicate softness in food service on-premise channel as well as lower traffic in convenience stores and gas stations. This is likely to hurt the top line to some extent in the upcoming quarter.

Meanwhile, the company notes that there has been a change in consumer channel preference since the middle of March, with a rise in in-home consumption and a fall in immediate consumption. Consequently, it is channelizing efforts to shift product mix to the e-commerce, club store, mass merchandiser, and grocery and related businesses, which have been witnessing stable trends amid the coronavirus pandemic.

Don’t Miss These Other Top-Ranked Beverage Stocks

The Boston Beer Company, Inc. SAM delivered a positive earnings surprise of 4.7%, on average, in the trailing four quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

National Beverage Corp. FIZZ has delivered a positive earnings surprise of 22.9%, on average, in the trailing four quarters. It presently flaunts a Zacks Rank #1.

CocaCola European Partners PLC CCEP, with a long-term earnings growth rate of 4.1%, currently has a Zacks Rank #1.

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