Monster Beverage Corporation (MNST) is set to release its third-quarter 2014 results on Nov 6, after the market closes. Last quarter, it posted a positive surprise of 6.58%. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Though the carbonated soft drinks (CSD) category has remained soft in 2014, energy drinks is one of the few categories that continue to gain momentum. In fact, the energy drink category increased in mid-single digits in the U.S during the second quarter of 2014. This growing momentum of energy drink category is expected to drive the demand for products of Monster Beverage, which in turn is expected to contribute to the company’s top line in the upcoming quarter.
However, new Monster Energy branded products like Ultra and Muscle Monster are cannibalizing sales of the existing brands like Absolutely Zero and Lo-Carb. Revenues are also impacted by lower growth rates of the energy category in Europe, the Middle East and Africa region, particularly Eastern Europe. Third quarter 2014 results are expected to be impacted by these trends.
In addition, Monster Beverage has been facing several other headwinds for the past few quarters, which is hurting profits.
Monster Beverage has been involved in several controversies. The Food and Drug Administration is currently investigating the impact of caffeine in food and dietary supplements, which includes Monster Beverage products. All these regulatory and litigation issues are increasing Monster Beverage’s professional service expenses, which are eroding its margins. We believe third quarter profits will also be pulled down by high legal costs.
Earnings Whisper?
Our proven model does not conclusively show that Monster Beverage Corporation is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Negative Zacks ESP: The ESP for Monster Beverage Corporation is -1.47% as the Most Accurate estimate stands at 67 cents while the Zacks Consensus Estimate is higher at 68 cents.
Zacks Rank #2 (Buy): Monster Beverage Corporation carries a Zacks Rank #2 (Buy) which when combined with a -1.47% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the consumer goods sector that can be considered as our model shows that these have a favorable combination of elements:
Coca-Cola FEMSA S.A.B de C.V. (KOF) with an Earnings ESP of +2.22% and a Zacks Rank #3 (Hold)
Central Garden & Pet Company (CENT) with an Earnings ESP of +32.0% and a Zacks Rank #3
Tempur Sealy International Inc. (TPX) with an Earnings ESP of +1.12% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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