Monster Beverages (MNST) Approves $500M Share Repurchase Plan
Monster Beverage Corporation MNST approved a new share repurchase program worth $500 million. As of Nov 7, the company has $282.8 million remaining under its existing repurchase program.
It is likely to repurchase shares in the open market via privately negotiated transactions by block-purchase or through broker-dealers, subject to applicable laws, regulations and approvals. This is likely to strengthen its financial position to stay afloat in this ongoing macroeconomic environment.
Other Key Drivers
The company has long been gaining from continued strength in its energy drinks category. Also, product launches and innovation, as well as pricing actions, bode well.
Strength in its energy drinks category, acts as a key growth driver. In second-quarter 2023, the Monster Energy Drinks segment's net sales increased 9.7% year over year to $1.7 billion and met our estimate. On a currency-adjusted basis, net sales for the segment rose 12%.
The company remains committed to product launches and innovation to boost growth. In second-quarter 2023, it launched many products and expanded distribution in the international markets. In the quarter, it continued with the roll-out of its first flavored malt beverage alcohol product, The Beast Unleashed, in the United States and received positive feedback. Consequently, MNST is on track with the expansion of the distribution of The Beast Unleashed into additional markets, with plans for nationwide distribution by the end of the year.
Also, Monster Beverages continued to implement price hikes in the second quarter of 2023, with additional price hikes planned in a number of other markets through the remainder of the year. In some markets, this rise is in addition to price increases implemented in 2022. In the United States, management implemented an additional price increase on its 18.6 oz and 24 oz energy drinks, effective Apr 1, 2023.
These factors led to year-over-year sales growth of 12% on a reported basis and 14.4% on a currency-adjusted basis in second-quarter 2023. Sales to customers outside the United States rose 10%, representing about 39% of the total net sales.
On a currency-adjusted basis, sales to customers outside the United States improved 16%.
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Shares of this Zacks Rank #2 (Buy) company have gained 9.7% year to date against the industry’s 1.7% growth.
However, it has been witnessing rising costs due to increased payroll expenses. The cost of sales was $880.7 million, up 0.6% year over year. Operating expenses grew 10.7% year over year to $450.4 million and surpassed our estimate of $443.7 million. Selling expenses, as a percentage of net sales, expanded 20 bps year over year to 9.3%. Also, the company continues to witness supply-chain headwinds.
Conclusion
Monster Beverages appears well-placed on the back of a solid financial position, the introduction of innovative products and the momentum in its energy drinks category.
The PEG ratio for MNST is just 1.64, a level that is far lower than the industry average of 2.40. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, MNST is a solid choice on the value front from multiple angles.
Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for fiscal 2023 sales and EPS is pegged at $7.17 billion and $1.55, suggesting respective growth of 13.6% and 38.4% from the year-ago reported figures. The Zacks Consensus Estimate for MNST’s 2023 earnings for the current financial year has inched up by a penny in the past seven days.
Stocks to Consider
Lamb Weston LW, which offers frozen potato products, currently sports a Zacks Rank #1 (Strong Buy). LW delivered an earnings surprise of 46.2% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers.
The J. M. Smucker Company SJM, a branded food and beverage product company, currently carries a Zacks Rank #2 (Buy). SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the year-ago reported figure.
Celsius Holdings CELH, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 100% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 88.9% and 170.3%, respectively, from the year-ago reported numbers.
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