Monster Beverage Corporation MNST delivered third-quarter 2024 results, wherein the top and bottom lines lagged the Zacks Consensus Estimate. While the bottom line declined year over year, the top line improved.
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Monster Beverage’s adjusted earnings of 40 cents per share missed the Zacks Consensus Estimate of 42 cents per share. The figure also declined 2.4% from 41 cents in the prior-year quarter.
Net sales of $1.88 billion grew 1.3% year over year but lagged the consensus estimate of $1.92 billion. Unfavorable currency translations hurt net sales by $62.8 million. Net sales rose 4.7% on a currency-adjusted basis and 5% excluding the Alcohol Brands unit.
Monster Beverage Corporation Price, Consensus and EPS Surprise
Monster Beverage Corporation price-consensus-eps-surprise-chart | Monster Beverage Corporation Quote
A Peek Into MNST’s Q3 Performance
Management highlighted that the energy drink category in the United States witnessed lower growth rates, in the convenience channel. However, the convenience channel showed signs of improvement in October. Outside of convenience stores, the category is expanding at a stronger pace across various retail channels. Nonetheless, the energy category grew globally and has demonstrated resilience.
Monster Beverage has been reviewing opportunities for price increases internationally. The company is making a roughly 5% price increase on its core brands and packages, effective Nov. 1, 2024, in the United States. For the fourth quarter, the company is continuing to monitor opportunities for further pricing actions in its international markets. It had a market share leadership in the energy drink category for its entire outlets combined in the United States for the 13 weeks ended Oct 26, 2024.
Per the Nielsen reports for the 13 weeks through Oct 26, 2024, for the company’s combined outlets, including convenience, grocery, drug, and mass merchandisers, sales in dollars in the energy drink category with energy shots rose 1.9% year over year. Its energy brands sales, including Bang, fell 0.6% in the 13-weeks. Monster’s sales were down 1.8%. Reign’s sales dipped 2.9%. While sales of NOS and Red Bull increased 2.9% and 5%, respectively, sales of Full Throttle declined 5.4%.
Net sales to customers outside the United States rose 3.6% to $760.1 million, representing about 40.4% of the total net sales. On a currency-adjusted basis, sales to customers outside the United States improved 12.1%.
Insights Into MNST’s Segmental Performance
Monster Energy Drinks: Sales of this segment, which includes Monster Energy drinks, Reign Total Body Fuel high-performance energy drinks, Reign Storm total wellness energy drinks, and Bang Energy drinks, rose 0.8% to $1.72 billion. The segment’s sales included a negative impact of $52.8 million from adverse currency rates. On a currency-adjusted basis, net sales for the segment rose 3.9%.
Strategic Brands: In addition to the affordable energy drink brands, the segment includes a range of energy drink brands acquired from Coca-Cola as well as the Company’s affordable energy brands Predator and Fury. The segment’s net sales grew 14% year over year to $112.6 million. Currency headwinds hurt sales by $10 million. On a currency-adjusted basis, net sales for the segment rose 24.1%.
Alcohol Brands: Net sales for the segment, which includes The Beast Unleashed, Nasty Beast Hard Tea, and several craft beers and hard seltzers, fell 6% year over year to $39.8 million, due to the soft sales volume of craft beers.
Other: Net sales for the segment, which includes some products of American Fruits & Flavors sold to independent third parties (AFF Third-Party Products), dipped 11.5% year over year to $5.9 million.
Analysis of MNST’s Costs & Margins
The cost of sales was $881.2 million, up 1% year over year. The company’s gross margin expanded 20 basis points (bps) year over year to 53.2%. However, excluding the impact of Alcohol Brands Inventory Reserves, the gross margin for the third quarter was 53.7%. The Alcohol Brands Inventory Reserves affected gross profit, while the margin increase was driven by pricing actions, lower freight-in costs, and Bang Inventory Step-Up, somewhat offset by higher promotional allowances for the Bang Energy and Alcohol Brands Inventory Reserves.
Operating expenses grew 9.9% year over year to $519.9 million, due to higher costs associated with sponsorships and endorsements, increased payroll expenses, and expenses related to intellectual property claims. The expenses were impacted by a $16.7 million provision and $1.2 million in legal expenses referred to as Hansen Expenses. As a percentage of sales, operating expenses expanded 210 bps to 27.6%.
Selling expenses, as a percentage of net sales, increased 90 bps year over year to 10.4%. Distribution costs, as a percentage of net sales, fell 20 bps to 4.4%. General and administrative expenses, as a percentage of net sales, jumped 150 bps year over year to 12.8%.
MNST’s Financial Health
This Zacks Rank #3 (Hold) company ended the third quarter with cash and cash equivalents of $1.6 billion, and total stockholders' equity of $5.8 billion.
In third-quarter 2024, Monster Beverage repurchased 11.3 million shares for an average price of $47.32 per share, amounting to $534.7 million. As of Nov. 6, 2024, roughly $500 million was available for repurchase under its earlier authorized repurchase program.
Shares of this Zacks Rank #3 (Hold) company have gained 21.6% in the past three months compared with the industry’s decline of 3.8%.
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Three Stocks Looking Good
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Ingredion INGR, Vital Farms VITL, and Vita Coco Company COCO.
Ingredion is a solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. It currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate Ingredion’s current financial-year EPS indicates growth of 12.5% from the year-ago reported numbers.
Vital Farms offers a range of produced pasture-raised foods. It presently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 82.5%, on average.
The Zacks Consensus Estimate Vital Farms’ current financial-year sales and EPS indicates growth of 27% and 88.1%, respectively, from the year-ago reported numbers. The consensus mark for VITL’s EPS has been unchanged in the past 30 days.
Vita Coco develops, markets and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa and the Asia Pacific. The company currently has a Zacks Rank of 2. COCO has a trailing four-quarter earnings surprise of 17.6%, on average.
The Zacks Consensus Estimate for COCO’s current financial-year sales and earnings suggests growth of 3.5% and 29.7%, respectively, from the year-ago reported figures.
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