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Monster Beverage (MNST) Rises 45% in 2020: Will Growth Persist?

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Zacks Equity Research
·4 min read
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Monster Beverage Corporation MNST has been resilient amid the challenges posed by the coronavirus pandemic in 2020, including the disruptions in the food service on-premise channel. Strength in the company’s energy drinks business, supported by the increased consumer awareness on health and wellness, mainly aided growth. Further, its product innovation strategy has been a significant contributor.

Apart from these, the stay-at-home directives due to the pandemic have led to a change in consumers’ behavior regarding what they have been buying and where they have been buying. This has led to spurge in at-home consumption, which has been a key sales driver in the past several months. Further, beverage companies have been benefiting from increased investments in digital platforms, as consumers’ have shifted to more online purchases.

Notably, the Zacks Rank #3 (Hold) company has a market capitalization of $50.2 billion. In the past year, it has gained 44.9% against the industry’s decline of 0.6%. Moreover, it has comfortably outpaced the Consumer Staples and the Zacks S&P 500 composite’s growth of 0.6% and 18.2%, respectively.



Factors Driving Momentum

Monster Beverage is among the companies that have been gaining from the aforementioned trends. The company saw continued growth in e-commerce, club store, mass merchandiser and grocery-related business during third-quarter 2020. Top-line growth was aided by increased at-home consumption trends, owing to a shift in consumer preferences for shopping channels and packaging options. Further, foot traffic at its largest convenience and gas channel has been witnessing improved trends since the latter half of second-quarter 2020, which continued throughout the third quarter.

Moreover, Monster Beverage’s supply chain remains unaffected, with no major impact on raw material and finished product shortages. It is also continually managing its aluminum can requirements to meet growth in volume despite the current industry-wide supply constraints for aluminum cans.

The company has been experiencing continued strength in its energy drinks category. In third-quarter 2020, the segment’s net sales rose 9.6% year over year to $1.16 billion. Also, sales of the energy brands, including Reign, rose 7.3% in the 4-week period ended Oct 24, 2020, in the convenience and gas channel. Management is optimistic about strength in the energy drinks category with the Monster Energy brand growing significantly. Product launches across the Monster family will also likely drive the company’s overall top and bottom lines in the quarters ahead.

Further, Monster Beverage remains committed to product launches and innovation to boost growth. During third-quarter 2020 and through early October, it launched many energy drinks of the Monster Energy brand, Reign Total Body Fuel high-performance energy drinks, and affordable energy brands in several domestic as well as international markets. It launched brands like Reign Total Body Fuel, Lilikoi Lychee, Ultra Watermelon, Ultra Rosa, Juice Monster Papillon, Juice Monster Khaotic, Ultra Paradise and Espresso Monster across many countries. Also, Monster Ultra Paradise was rolled out in Iceland, Poland, South Africa and Malta, and is currently available across 18 EMEA markets.

Moreover, Espresso Monster, mocha and vanilla variants are presently available in 21 markets in EMEA, and Reign Total Body Fuel is available across eight markets. In China, the company has been receiving positive consumer feedback for the distribution of its new non-carbonated Monster Energy Dragon Tea in May 2020.

Near-Term Headwinds

Although Monster Beverage delivered a sturdy quarter, the company expects the pandemic-related impacts to be a heightened threat in a number of countries, including EMEA, as these are reinstituting lockdowns and other restrictions due to a second COVID-19 wave. Moreover, the COVID-19 pandemic concerns remain. These factors may adversely affect the product introductions, moving ahead. In addition, the food service on-premise channel has been challenged.

Other Stocks to Consider

National Beverage Corp. FIZZ delivered an earnings surprise of 28%, on average, in the trailing four quarters. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Boston Beer Company, Inc. SAM delivered an earnings surprise of 23.1%, on average, in the trailing four quarters. The company presently has a Zacks Rank #2.

Molson Coors Beverage Company TAP currently has a long-term earnings growth rate of 3.7% and a Zacks Rank #2.

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