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Will Energy Drinks Aid Monster Beverage (MNST) Q4 Earnings?

Zacks Equity Research

Monster Beverage Corporation MNST is slated to release fourth-quarter 2018 results on Feb 27.

In the last reported quarter, the company reported positive earnings surprise of 8.7%. Moreover, it delivered average positive earnings surprise of 1.4% in the trailing four quarters. The Zacks Consensus Estimate for fourth-quarter earnings of 40 cents remained unchanged in the last 30 days. It represents 14.3% year-over-year improvement.

Monster Beverage Corporation Price and EPS Surprise

Monster Beverage Corporation Price 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 Q4

Monster Beverage has been witnessing solid momentum in the energy drinks business amid a challenging industry backdrop. This momentum is aided by the company’s wide range of energy drink brand offerings — including Monster Energy, Java Monster and Worx Energy among others. Additionally, optimism regarding its alliance with Coca-Cola’s bottlers globally, which broadened its distribution network, is aiding growth. Moreover, the company’s top line is poised to benefit from the product innovation strategy and regular product launches.

Monster Beverage expects the momentum in the energy drinks category to continue in the months ahead, courtesy of gains from Monster Energy, Monster Hydro and Mutant drinks brands. Moreover, additions to the Monster brand are expected to generate incremental sales and boost profitability. This should benefit the company’s top line in the fourth quarter.

Simultaneously, Monster Beverage’s solid international presence and plans for further expansion are working in its favor. Notably, the company expanded international operations into various markets — including China, India, and countries in Africa and the Middle East. Further, product innovation plays a significant role in the company’s success. Monster Beverage launched its brands across various countries in the third quarter of 2018. Management remains optimistic about the prospects of its brands and product launches.

All these factors should continue to boost the company’s top line in the fourth quarter. Notably, the Zacks Consensus Estimate for revenues for the fourth quarter stands at $895.8 million, reflecting an increase of 10.5% year over year.

Moreover, the stock has gained 6.7% in the past month against the industry’s 0.7% decline. This reflects a positive sentiment on the stock ahead of the earnings release.

However, higher raw material costs, mainly aluminum, and unfavorable product mix continue to remain hurdles. This might continue to dent the company’s margins in the to-be-reported quarter.

Zacks Model
Our proven model does not conclusively show that Monster Beverage is likely to beat earnings estimates in the fourth 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 0.00% and a Zacks Rank #2. Though the company’s rank increases the predictive power of ESP, its ESP of 0.00% makes surprise prediction difficult.

Stocks with Favorable Combination

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

Turning Point Brands, Inc. TPB has an Earnings ESP of +11.11% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker Inc. FL has an Earnings ESP of +2.25% and a Zacks Rank of 2.

Abercrombie & Fitch ANF has an Earnings ESP of +0.94% and a Zacks Rank #2.

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Monster Beverage Corporation (MNST) : Free Stock Analysis Report
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