Monster Beverage Corporation’s (MNST) fourth-quarter 2013 adjusted earnings of 44 cents per share missed the Zacks Consensus Estimate of 45 cents by 2.22%. We believe the better-than-expected top-line performance was offset by weaker margins, currency headwinds and increased tax rates. Earnings, however, increased 12.8% year over year.
Revenues
Monster Beverage’s net sales of $540.9 million surpassed the Zacks Consensus Estimate of $522 million by 3.6% and rose 14.7% year over year. Solid net sales in the quarter were driven by a robust 15.2% increase in sales in the Europe, Middle East and Africa region, successful launch of new Ultra Red energy drink, and increased sales of Zero Ultra and Ultra Blue and new Muscle Monster products in the U.S.
However, the company’s new Monster Energy branded Zero Ultra, Ultra Red and Ultra Blue energy drinks continued to cannibalize sales of the existing brands. Also, sales of Monster Energy protein glass bottles during the quarter were soft in the U.S.
Net sales of the Direct Store Delivery (DSD) segment increased 15.2% to $519.4 million, due to higher sales of Monster Energy drinks. The higher sales volume was driven by an increase in demand in existing national and international markets and expansion into new international markets.
Net sales outside the U.S. increased 19.7% year over year to $137.9 million in the quarter.
Margins
Gross margin contracted 50 basis points (bps) to 51.2% due to certain inventory and reserves damages. Operating margin is 24.9%, up 70 bps year over year. The company reported foreign currency transaction losses of $3.6 million in the quarter, up 33.3% from the prior year quarter. The company faced unfavorable currency translations especially in Japan, Australia and South Africa. On the other hand, Professional service cost during the quarter was $4.7 million, up from $1.4 million in the prior-year quarter.
As a percentage of revenue, distribution costs decreased 20 bps to 4.5% while selling expenses improved 170 bps to 10.8%. The company benefited from lower sales, premiums and other marketing expenses. Effective tax rate in the quarter was 42.2% compared with 39.1% in the prior-year quarter.
Financial Update
The company ended the quarter with cash and cash equivalents of $211.4 million as of Dec 31, 2013, lower than $287 million as of Sep 30, 2013.
Fiscal 2013
Monster Beverage’s full year 2013 adjusted earnings of $1.95 per share missed the Zacks Consensus Estimate of $1.98 by 1.5%. Earnings increased 4.8% year over year.
Monster Beverage’s net sales of $2.2 billion in 2013 were in line with the Zacks Consensus Estimate and rose 9.0% year over year.
Other stocks to consider
Monster Beverage currently carries a Zacks Rank #3 (Hold). Investors interested in the beverage industry can also consider stocks like Coca-Cola Enterprises Inc. (CCE), Dr Pepper Snapple Group, Inc. (DPS) and The WhiteWave Foods Company (WWAV). All the three stocks carry a Zacks Rank #2 (Buy).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment