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Will Product Launches Drive Monster's (MNST) Q2 Earnings?

Monster Beverage CorporationMNST is slated to release second-quarter 2018 results on Aug 8.

In the last reported quarter, the company's earnings matched the analysts' expectation. However, it has delivered an average negative earnings surprise of 2% in the trailing four quarters. Nevertheless, the Zacks Consensus Estimate for second-quarter earnings of 47 cents has moved north in the last 30 days and represents 20.5% year-over-year improvement.

Monster Beverage Corporation Price, Consensus and EPS Surprise

Monster Beverage Corporation Price, Consensus and EPS Surprise | Monster Beverage Corporation Quote

Let's see how things are shaping up prior to the upcoming earnings release.

Factors Likely to Impact 2Q18

Monster Beverage's constant efforts to innovate products and brand launches are likely to boost revenues, which is impressive. The company regularly introduces new flavors of existing products and discards non-performing products. We expect the company's top line to gain from the planned launch Monster Ultra Citron in Korea and Cuba Libre in Japan in the second quarter. In 2018, management intends to launch various products in both the company's domestic and international markets. In Ecuador and Uruguay, Monster brand is expected to be launched later this year.

This apart, Monster Beverage remains optimistic about product benefits from the broader distribution network, as a result of the Coca-Cola deal. In fact, the company has been expanding its international operations into a variety of new markets, including launches in China and various African and Middle Eastern countries. Notably, its gross sales to customers outside the United States were roughly 28% of consolidated gross sales for 2017.

The company has also been smoothly expanding in the United States in non-traditional channels, which include foodservice, accounts and e-commerce. Additionally, energy drinks comprising Monster Energy, Monster Hydro and Mutant Super Soda drinks should continue gaining momentum.

All these initiatives are expected to boost the company's top line in the second quarter. Notably, the Zacks Consensus Estimate for quarterly revenues stands at $1,034 million, reflecting an increase of 13% year over year. Moreover, the stock has gained 12.8% in a year's time, outperforming the industry 's 3% growth.

However, higher raw material costs, mainly aluminum; and unfavorable product mix continue to remain hurdles. This, in turn, might dent margins in the upcoming quarter. Also, softness in the beverage industry due to growing health and wellness consciousness, better beverage alternatives like ready-to-drink tea and bottled water as well as shift in consumer preferences have been impacting the volumes of soda beverages and energy drinks.

Zacks Model

Our proven model shows that Monster Beverage is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Monster Beverage has an Earnings ESP of +0.05% and a Zacks Rank #3, making us confident of an earnings beat.

Other Stocks With Favorable Combination

Here are some companies that you may want to consider as our model shows that these too have the right combination of elements to deliver an earnings beat:

Ollie's Bargain Outlet Holdings, Inc. OLLI has an Earnings ESP of +1.57% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

McCormick & Company, Incorporated MKC has an Earnings ESP of +2.19% and a Zacks Rank of 3.

General Mills, Inc. GIS has an Earnings ESP of +0.59% 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 Nasdaq, Inc.


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

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